GBP/USD Drops to 1.59 as U.K. Inflation Slows

The pound fell to an 11-month low against the dollar as a report showed U.K. inflation slowed to the least in five years last month, adding to pressure on the Bank of England to keep interest rates at record lows.

Sterling weakened versus all but two of its 16 major peers after a report showed annual consumer-price growth slowed to 1.2 percent, from 1.5 percent in August. U.K. 10-year government bonds climbed for a seventh day, the longest winning run since August 2011, pushing the yield to the lowest in more than a year. Yields on two-year gilts, more sensitive to rate expectations, fell the most since August, while short-sterling futures contracts rose.

“The market spent the first half of the year getting excited about how quickly the BOE might have to hike,” said Daragh Maher, a foreign-exchange strategist at HSBC Holdings Plc in London. “Now they’re having to delay those expectations. The real surprise is that there’s not been an even bigger sterling selloff in response to this sizable downside surprise.”

Bloomberg

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