Sterling slipped below $1.27 to its weakest level since June 2017 as the dollar extended its recent rally and after British price rises for the month of July were as expected.
The British currency has weakened sharply in August as traders grow increasingly worried that the UK will crash out of the European Union next year without a trade deal arranged, and as the US dollar has surged.
Sterling has fallen for 11 consecutive days, its longest losing streak since August 2008.
Consumer price inflation nudged up to 2.5 per cent year-on-year in July from 2.4 per cent the previous month, in line with a Reuters poll of analysts.
The rise is the first time inflation has picked up in 2018 and leaves many British households still feeling squeezed - workers’ wagers have failed to keep up with inflation for much of the past decade.
“What is likely to be more concerning domestically is that inflation is once again outpacing wage growth, which will lead to the question over whether the Bank of England (BoE) might be tempted to lean towards another increase in UK interest rates,” said Jameel Ahmad, a market analyst at FXTM.
The pound was largely unmoved, with the performance of the US dollar a bigger factor for the British currency on Wednesday.
After falling to as low as $1.2693 in Asian trading, sterling recovered to $1.2710, down 0.1 per cent on the day against a broadly stronger dollar.
Against the euro, the pound rose 0.1 per cent to 89.115 pence per euro.
Data on Tuesday showed British workers’ wages rising at their slowest rate for nine months, up 2.4 per cent annually, although there was a surprise fall in the unemployment rate.
“We still see scope for some strengthening of wage growth going forward and the data provided the justification for the action taken by the BoE at the start of this month,” MUFG analysts said.
“Again though, Brexit uncertainty and general dollar strength will limit GBP/USD upside over the short-term.” – Reuters
