Sterling lower after softer CPI

Cable down around 45 pips initially after weaker than expected CPI data, which showed headline falling to 1.6%, from 1.9%. Expectation was for 1.8%. Much of the volatility seen over the past two months down to volatility in clothing and footwear prices and the timing of sales, which were seemingly earlier last year (impacting the YoY measures). The expectation did seem on the high side given this, but the skew of forecasts was to to the downside. This was probably largely factored in by the Bank, so in essence should not change significantly the outlook for rates, but near-term reaction is understandable. Release of minutes to August MPC meeting tomorrow the next focus for sterling.

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