Pound Drops Further after Report Shows U.K. Inflation Slows Down

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Pound Drops Further after Report Shows U.K. Inflation Slows DownThe pound looked set to record its lowest level in 10 months against the dollar after data indicated that U.K. consumer-price inflation grew at the slowest pace in five years.

The U.K. currency plunged 0.1 percent to trade at $1.6221 as of 4:42 p.m. in London after earlier declining to $1.6052 on September 9, its weakest level since November 15. The pound fell for the third day against the euro, dropping under 0.1 percent to 79.77 pence per euro.

The Bank of England is due to publish the minutes of its September’s policy meeting on Wednesday. BoE’s officials, Ian McCafferty and Martin Weale, voted in August policy meeting to have interest rates increased.

U.K.’s consumer-price growth plunged to 1.5 percent on an annual basis in August, compared with 1.6 percent in July, reported the London-based Office for National Statistics. If May is excluded, this was the slowest growth in five years.

“It looks like the pound was sold ahead of the CPI report,” Gavin Friend, a London-based currency strategist at National Australia Bank, told Bloomberg News. “There may have been a flurry of downside risk on that. The risk is either Miles or McCafferty move back into the pack given the slightly weaker data.”

U.K. government bonds rose ahead of Scotland’s independence vote, which is scheduled for Thursday, after polls showed either “Yes” or “No” votes may win. Yields on the 10-year gilts dropped 0.01 percentage point, or one basis point, to 2.53 percent. The 2.75 percent bond that matures in September 2024 gained 0.08 to 101.90. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com