The market is currently looking for the year-over-year CPI to stay at last month's level of 4.5%. However, core CPI, which excludes food and energy, is expected to fall marginally to a year-over-year change of 3.5% from last month's reading of 3.7%. Paradoxically, a decline in the rate of inflation may actually be bad news for the pound, as many believe that this would give the central bank an excuse to keep its low interest rate policy for a longer period of time. However, considering that a number of other central banks have either hinted at hiking rates or have actually gone through with a rate increase, including the eurozone, even a modest uptick in inflation could force the bank to act before the year is out, even though the rate of growth in the British economy is still pretty weak. "If inflation is higher, we're likely to see sterling gain but it will probably be short-lived," said Lee McDarby, head of dealing for corporate and institutional treasury at Investec. "The market needs to see a sustained uptick in data before there is any real talk of interest rates rising.” [British Pound ETFs: The Real Danger]
Thanks to this key announcement, investors should look for the Rydex CurrencyShares British Pound Sterling Trust
[For more ETFs to watch sign up for our free ETF newsletter.]
More from ETFdb.com:
Disclosure: No positions at time of writing.
ETF Database is not an investment advisor, and any content published by ETF Database does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. From time to time, issuers of exchange-traded products mentioned herein may place paid advertisements with ETF Database. All content on ETF Database is produced independently of any advertising relationships. Read the full disclaimer here.
Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.