Money News Overview 16th October: UK inflation drops below 2%

CPI inflation, which was the most significant piece of data, came in significantly below the market consensus at 1.7 percent.

Already released this morning, a flurry of key UK economic data has been published. CPI inflation, which was the most significant piece of data, came in significantly below the market consensus at 1.7 percent.

UK inflation has dropped below the Bank of England’s target level of 2 percent, which is the lowest level of inflation since April 2021. CPI inflation is down 0.5 percent from August, placing an enormous amount of pressure on the BoE to reduce interest rates as inflationary tensions ease.

Pound Sterling was supported yesterday following important employment data. The unemployment rate dropped to 4 percent, its lowest level since earlier this year.

Despite an initial positive outlook after favourable employment figures, the UK economic data released earlier today has wiped out all of Pound Sterling’s recent gains and more. GBPUSD has dropped by 0.6 percent, while GBPEUR has fallen by 0.4 percent.

The disappointing data has triggered a sell-off in the pound and has reinforced BoE Governor Andrew Bailey’s comments regarding taking a more aggressive outlook on reducing the base rate.

Investors will now look towards UK retail sales data on Friday, to see if data can release in the green to bolster the Pound.

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