Sterling falls to a seven year low against the US dollar, despite positive inflation news

Sterling suffered further losses on Tuesday as Bank of England (BoE) Governor Mark Carney talked down any prospect of a UK interest rate hike in 2016. The British currency had begun the day in a positive fashion, making gains across the board as inflation throughout December was reported at 0.2% – an increase on the 0.1% inflation forecast by a consensus of economists. However, as BoE Governor Carney offered his stark warning, sterling came under pressure and fell below 2010 lows against the US dollar – stabilising at the lowest rate seen since March 2009 against the American currency. It also suffered a similarly poor performance against the euro, falling to a fresh 12-month low as unconventional monetary policy seemingly supported European growth prospects.

We have another significant day today for UK data releases, as the latest UK jobs report will reveal average earnings throughout the previous quarter, as well as the current unemployment rate. With unexpectedly positive inflation seen yesterday, investors will be hopeful that another strong data release could provide sterling with a much-needed boost.