This morning the latest UK Consumer Price Index has revealed an unexpected rise in inflation caused by rising prices for food and clothing.
Inflation rose to 3.3% in October beating market expectations that it would remain stable at 3.2%.
This is good news for sterling on the one hand. The new inflation data all but eliminates the chance that the Bank of England will introduce another round of quantitative easing.
This (QE) is perceived to devalue the pound, meaning that the inflation numbers could foster a stronger pound.
On the back of the inflation figures sterling rose 0.2 cents against the dollar reaching 1.5875.
On the other hand the new CPI numbers point to a rising cost of living for UK consumers.
This could ultimately result in reduced consumer spending as increases in VAT and gas prices are expected shortly too.
By Peter Lavelle with foreign currency exchange specialist Pure FX.