UK inflation data supports the pound

The pound found some support yesterday after the publication of the latest UK inflation data showed that the rate of inflation in the UK remained steady but did not continue to ease as predicted by analysts.

The Consumer Price Index (CPI) measure of inflation remained unchanged at 2.7% in September against the expected reading of 2.6%.

Meanwhile, the retail price measure of inflation also slowed falling from 3.3% to 3.2% in the same period.

The US dollar strengthened yesterday morning after some overnight news sparked speculation that the Republicans and Democrats were making sufficient progress for expectation to increase that an announcement could be made but this not only failed to materialise but talks broke down heaping further pressure on the dollar.

Credit ratings agency Fitch Ratings warned that it has placed the US AAA credit rating on ‘negative watch’ after the stalled negotiations to raise the nation's debt ceiling and end the government shutdown. Fitch continues to believe that the US will raise its $16.7 trillion debt ceiling in time to ensure it can keep up with interest payments on its sovereign debt but stated last night that the ongoing political stand-off in Washington was “casting doubt over the full faith and credit of the US”.

Crude oil futures settled at their lowest level for over three months yesterday on the news from Washington putting further selling pressure on the Canadian dollar.