The Pound Sterling initially edged lower in Wednesday trade after disappointing inflation data ramped up market expectations that the Bank of England will be cutting its lending rate at this month's meeting. According to the Office of National Statistics, CPI hit 1.3% last month, down from November's 1.5% and the smallest increase in three years. Analysts had predicted that CPI would be flat at 1.5%. The news has led markets to expect Mark Carney will likely vote for a reduction at the January 30th meeting, unless there is some significantly improved data. This week alone, UK data has been disappointing, with industrial production and growth worse than anticipated.
The GBP/USD pair was trading higher at 11:20 am in London, hitting $1.3022, a gain of 0.043% and moving off the session trough of $1.29835 following the knee jerk reaction after the data release. The EUR/GBP was trading at 0.8562 Pence, up 0.2224%; the pair has ranged from a low of 0.85370 Pence to a high of 0.85718 Pence in today's session.
Eurozone Inflation Data in Focus
In the Eurozone, Eurostat released industrial production data earlier today, which fell short of expectations. Seasonally adjusted industrial production in November (on a month-over-month basis), fell to 0.2%, below the expected 0.3%, while the previous month's data was revised to -0.9% from -0.5%. The Euro showed little reaction to the data, with the EUR/USD trading higher at $1.1149, up 0.1851%. German inflation data is due out tomorrow, with analysts calling for a flat reading of 1.5% on an annual basis. On Friday, CPI data for the Eurozone will be released.