The latest figures on price pressures in the UK have shown a larger than forecast drop, with the consumer price index for September coming in at 2.4% Y/Y. This is the joint lowest reading in 18 months and suggests that inflation is coming back to target in a pleasing development for the Bank of England. The previous month showed an unexpected rise, to 2.7% Y/Y, but the latest data has allayed fears of another push higher. 5 of the last 8 months have shown lower than forecast inflation figures and it seems that the Bank of England’s policy tightening is yielding the desired results.
There’s been a little dip in the pound on this release but the main driving factor for the currency, in the short term at least, remains Brexit negotiations. With the EU summit kicking off today, there’s a good chance we get some further information on this front before too long and given the large amount of short positioning in sterling, the market is primed for a strong move higher should any positive developments occur.