The U.K. inflation data for the month of November is set to release tomorrow. According to a Wells Fargo research report, inflation is expected to have slowed marginally to 2.3 percent in the month from 2.4 percent in the prior month. Inflation has been decelerating in the U.K. as the effect from the pound’s post-Brexit fall continues to wane.
This slowing trend in inflation has likely been supportive to growth, as falling inflation and rising wage growth from a tight labor market are supportive of real income growth. During its last meeting, the Bank of England judged that, as a result of a closed output gap, “excess demand is expected to build, feeding through into higher growth in domestic costs.”
While this sounds like a recipe for tighter policy, the central bank will need to grapple with the tumultuous Brexit situation when it meets next Thursday, said Wells Fargo.
“We look for the BoE to remain on the sidelines until Q2-2019, by which point we expect the worst of the Brexit uncertainty will have cleared”, added Wells Fargo.
At 19:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at -29.4308, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -81.9156. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex
