GBP/INR is trading sideways on Wednesday morning, after two bullish sessions. Currently, one British pound buys 95.859 Indian rupees, down 0.01% as of 6:30 AM UTC.
Investors are now looking into the inflation data released by the UK’s Office for National Statistics (ONS), which came a few minutes ago.
Britain’s consumer price index (CPI) dropped to the lowest level since June 2016 in May, as the pandemic hurt demand. The main index of inflation fell to 0.5% from 0.8% in April, in line with analysts’ forecasts.
Core CPI, which doesn’t include the prices of food, alcohol, tobacco and energy, declined to 1.2% in May from 1.4% in April. Economists anticipated a modest drop to 1.3%.
ONS Deputy National Statistician Jonathan Athow commented:
“There was a continued drop in prices at the pump in May, following the huge crude price falls seen in recent months.”
The price of oil tumbled to the lowest level in three decades in March and at one point even entered the negative territory for the first time in history. That was the result of a price war between Saudi Arabia and Russia.
The ONS said that fuel, clothing and transport prices dragged inflation down last month. Fuel and lubricant prices experienced the biggest year-on-year decline on record, falling by 16.7%. Elsewhere, clothing prices were down 3.1%, which is the largest decline in a decade.
BoE Might Start Another QE Programme
Given the drop in inflation, most analysts surveyed by Reuters anticipate the Bank of England to announce another 100 billion pounds of bond purchases, after the 200 billion pounds porgramme it launched in March.
In May, the central bank said that lower oil prices, along with other factors, would likely maintain inflation below 1% for several months.
The sterling will probably remain under pressure today, given the decline in core inflation and producer price index (PPI) input, which rose only 0.3% from April.
There is positive news for pound investors as well. Today, New Zealand and the UK have launched free trade talks.
New Zealand will become among the first countries to negotiate a trade deal with the UK after it left the European Union.
