Sterling was unable to hold gains against the Euro on Monday and an advance for the US dollar pushed the US currency down to lows below 1.82 in early New York. The UK currency held close to this level in early Europe on Tuesday before strengthening slightly. Although changes in oil prices will have some short-term impact, domestic and international interest rate expectations are liable to dominate over the next 48 hours.
Domestically, the latest inflation report recorded a 0.3% rise in consumer prices with the annual rate increasing to 2.3% from 2.2% the previous month. The core annual rate was still subdued at 1.2%, but the higher inflation rate will put additional pressure on the Bank of England to tighten monetary policy. Sterling rose to 1.8280 against the dollar with gains against the Euro. The bank of England minutes on Wednesday will be watched very closely for evidence on the bank's likely stance in August.
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