The British pound is lower against the dollar on Wednesday after UK inflation data missed expectations by a wide margin while another central banker said UK rates should come down.
Sentiment was inhibited across global markets as details of the phase one trade deal between the US and China suggested tensions between the two nations look likely to persist.
GBP/USD was lower by 13 pips (-0.10%) to 1.3006 as of 1.30pm GMT, as it struggles for direction either side of the key 1.30 level. Sterling had made some early gains versus the dollar on Wednesday but stalled near 1.304 and slumped back below 1.30, only to recoup the level later.
UK inflation fell more than expected in December in data released Wednesday morning. The weaker UK inflation gives the Bank of England more scope to act on some the hints of a rate cut coming from its policymakers in recent days. Weak economic data, including today’s inflation reading is increasing expectations that the BoE will cut interest rates soon, maybe as early as its meeting at the end of this month.
Bank of England policymaker Michael Saunders added to the recent dovish rhetoric by saying it was probably appropriate to cut UK interest rates at a speech on Wednesday. Saunders was one of the first central bankers in the UK to switch from calling for tighter monetary policy to a looser stance.
Consumer prices, retail prices and producer prices all grew at a slower pace. The Consumer Price Index (CPI) for December rose just 1.3% year-over-year, much lower than consensus forecasts of a 1.5% y/y rise, which would have kept inflation steady from the 1.5% print in November.
US Treasury Secretary Steve Mnuchin confirmed reports that tariffs against China will remain until at least November and won’t be rolled back until a phase two deal is agreed after the US election. US President Trump is scheduled to sign the agreement with Chinese vice premier Liu He at the White House later today.