Sterling suffered a heavy decline on Wednesday, slipping to its lowest level in six weeks against the dollar as a sharper than expected slowdown in UK inflation eased the pressure on the Bank of England to keep raising interest rates.
The pound dropped as much as 1.5 per cent to $1.198, a level last touched in early January. The moves followed the release of data showing UK inflation fell to a five-month low of 10.1 per cent in January from 10.5 per cent the previous month. Economists polled by Reuters had forecast a drop to 10.3 per cent.
The currency’s decline reflects a growing conviction among investors that the Bank of England might be about to pause its monetary tightening cycle, and comes as strong US economic data fuels bets that the Federal Reserve may have further work to do to rein in inflation.