However, the year-on-year Retail Prices Index – another important inflation gauge – dropped from 2.9 percent to 2.8 percent. Overall, today’s data supported sentiment and diminished expectations that the BoE will make changes to interest rates in its scheduled September 19 meeting. James Smith, a Developed Markets Economist at ING, commented: “[W]e suspect the Bank of England will continue to focus on the strong wage growth backdrop. Unlike in other global economies, a UK rate cut seems unlikely in the near-term.”
Brexit remains in focus today after former Chancellor of the Exchequer Philip Hammond warned Prime Minister Boris Johnson, leaving without a deal on October 31 would be a betrayal of the referendum result.
Mr Hammond said: “Most people in this country want to see us leave in a smooth and orderly fashion that will not disrupt lives, cost jobs or diminish living standards, whether they voted leave or remain in 2016.
“The unelected people who pull the strings of this government know that this is a demand the EU cannot, and will not, accede to.”
Meanwhile, the US dollar stabilized as US President Donald Trump announced tariffs on some Chinese goods would be delayed until December 15.
Tom Plumb, a Chief Investment Officer at Plumb Funds, said: “It’s unlikely that there’s going to be major deal but we might start to see some small concessions on both sides.”
However, US dollar traders remain cautious after China failed to increase its purchase levels of US agricultural products despite Mr Trump’s concession on tariffs.
Looking ahead, Brexit developments will continue to dictate movement in the pound to US dollar exchange rate, with any further signs of a break-down in UK-EU negotiations likely to see Sterling fall against its peers.