As you probably have all seen on the Evening News and splashed all over the front pages of today’s papers CPI in the UK is at its highest level since 1992. CPI has risen by 1.2% this year with 1.1% attributable to rises in the price of fuel, gas, electricity and foods. The core CPI level, which excludes the above components, is however still lying at 1.5%; a small note of consolation for Mervyn and the MPC. With sterling falling and impotently flailing around it was not able to take advantage of a poor German ZEW figure. The sentiment index fell to a record low as inflation concerns worry German investors. Comments from ECB member Mersch overnight underpinned the euro as he pontificated that a rate rise in July was a ‘possible certainty’. Today is a fairly quiet day in terms of quantity of data however this morning’s Bank of England Minutes may provide another opportunity for sterling bears to strengthen their position.

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