The British pound strengthened against the US dollar, Euro and Japanese Yen as producer prices grew by the fastest pace in 22 years.
The annualized pace of PPI growth jumped to 10 percent last month even though the monthly pace slowed. Tomorrow we will find out whether producers have been able to pass on a good portion of the burden of record oil prices onto consumers. Inflation is the only reason why the Bank of England has not cut interest rates as their economy continues to slow. They are in a very difficult situation now because they want to cut rates. BoE member Barker said this morning that "The mistake we could make, and we are all worried about this, is of holding policy too tight, and the economy weakening more than is necessary to get inflation back on target." Meanwhile BRC retail sales and the RICS house price balance are due for release this evening – which could take some steam out of today’s British Pound rally.