Sterling tumbled in European trade on Wednesday to below $1.3 against the dollar for the first time in two months, following mainline UK inflation data, which were colder than expected.

The data showed that inflationary pressures on the Bank of Englands policymakers are receding, which boosted the odds of a 0.25% UK interest rate cut in November.

The Price

The GBP/USD pair fell 0.7% today to $1.2982, the lowest since August 20, with a session-high at $1.3077.

The pound rose 0.1% against the dollar yesterday in an attempt to recoup some losses.

UK Inflation

Government data showed UK consumer prices rose 1.7% y/y in September, the slowest such reading since April 2021, and below estimates of 1.9%.

Core inflation, excluding food and fuel prices, rose 3.2% y/y in September, below estimates of 3.4%.

Services prices rose 4.9% in September, marking the lowest pace in two years.

Its the first time that UK inflation has officially fallen below the 2% target in three and half years, a development that will be most welcomed by the Bank of England.

Bank of England Governor Andrew Bailey recently told the Guardian that the bank might move faster to cut interest rates if inflation remained under control.

UK Rates

Following the data, the odds of a 0.25% UK interest rate cut in November rose to 100%, with markets expecting 50 basis points of cuts overall before the year end.