Sterling dips as consumer price inflation continues to fall

Andy Scott, premier account manager at foreign currency brokers HiFX says Sterling dips as consumer price inflation continues to fall: "The pound dropped back from a 2-week high against the US Dollar and a 44-month high against the Euro Tuesday after a sharper than expected decline in inflation data for June. The rate of increase in the prices for a range of goods dropped to just 2.4% on an annualised basis from 2.8% the previous month. The continued fall in inflation supports the decision by the Bank of England to expand monetary policy again this month through an additional £50bn of Quantitative Easing and given the continued weakness in the UK economy; will likely lead further easing in the month's ahead.

"Sterling's fall will be welcomed by the UK's exporters who are seeing margins being squeezed due to the Pound's 6% gain against the single currency this year so far, and a whopping 12% on this time last year! With no immediate timeframes set for closer integration between the 17 nations that use the single currency and Spanish borrowing costs still close to the 7% danger level, we are forecasting further loses for the Euro against its major counterparts in 2012."