The pound dropped to a four-month low versus the dollar after a report showed U.K. inflation slowed more in July than economists forecast, giving the Bank of England extra room to delay raising interest rates.
Sterling weakened against all of its 16 major peers after data published by the Office for National Statistics showed the rate of consumer-price inflation fell to 1.6 percent from a year earlier, compared with 1.9 percent in June. The central bank tomorrow is scheduled to publish the minutes of its August policy meeting, when officials left the benchmark rate at a record-low 0.5 percent. U.K. government bonds rose.
“The Bank of England is an inflation-targeting central bank and inflation is turning out softer than they expected,” said Paul Robson, a senior foreign-exchange strategist at Royal Bank of Scotland Group Plc in London. “That might just see a more negative shine to sterling over the coming days. Markets are pushing back from previously pricing a November rate hike back into the early part of next year.”
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