LONDON: Sterling fell against the dollar and euro after data showed British inflation fell in November and came in well below expectations, offering support to those who think Bank of England rate cuts are getting closer.

The pound was last down 0.5% at $1.2663, having been down around 0.15% immediately before the data.

It also softened versus the euro, which was up 0.35% at 86.55 pence.

FTSE stock futures extended their gains, trading up 0.8%.

British government bonds have not yet started trading. British annual consumer price inflation fell to 3.9% in November from 4.6% in October, the lowest rate since September 2021.

The reading was below all forecasts in a Reuters poll of economists which had pointed to a figure of 4.4%.

Core inflation also cooled by an unexpectedly large amount, falling to 5.1% from 5.7%.

Inflation measures remain above the Bank of England’s 2% target however.

Sterling firms on dollar, all eyes on Bank of England

“Today’s data will bolster the Bank of England’s argument that it remains too early to consider cutting interest rates, particularly with core inflation significantly above levels consistent with the inflation target,” said Yael?Selfin, chief economist at KPMG UK.

Markets are currently fully pricing in a 25 basis point Bank of England rate cut in June 2024 and indicate a greater than 50% chance of a cut in May.