Deflation Fears Hold UK Pound Back

Worries about deflation are holding the UK pound back today. Sterling is mostly lower against its major counterparts, struggling as Forex traders process the weak data already shared and worry about the next data releases.

Deflation concerns are on the rise, thanks in large part to the latest inflation figures, released last last week. Price growth slowed to 0.1 per cent in February, a drop from the 0.3 per cent growth from January. With inflation remaining stubbornly low, the Bank of England is unlikely to change its quantitative easing program.

Also causing concern is the worry over deflation. Fears about what’s next for the UK economy are weighing on the sterling, especially with additional data releases slated for this week. Wage data from last week also isn’t helping matters.

One of the reasons that inflation data is so important is due to the fact that the Bank of England has been trying to boost inflation for several years, hoping to avoid a deflation scenario. If things continue to deteriorate, there is a good chance that the BOE will have to take more drastic steps.

At 11:02 GMT GBP/USD is down to 1.4917 from the open at 1.4972. EUR/GBP is up to 0.7287 from the open at 0.7240. GBP/JPY is down to 178.7930 from the open at 179.4850.

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