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Sterling remained weak at midday on Wednesday and stocks traded in narrow ranges as a slow in UK inflation in January raised questions about the future of interest rates.
The FTSE 100 index was just 3.21 points higher at 7,956.98. The FTSE 250 was up 34.32 points, or 0.2%, at 20,052.55. The AIM All-Share was down 0.01 of a point at 867.25.
The Cboe UK 100 was down 0.1% at 867.25, the Cboe UK 250 was flat at 17,473.34, and the Cboe Small Companies was down 0.1% at 13,947.69.
Inflation in the UK slowed by slightly more than forecast in January, though remained in double digits, figures from the Office for National Statistics showed.
On an annual basis, the consumer price index eased to 10.1% in January from 10.5% in December. Consensus had expected inflation to cool to 10.3%, according to FXStreet.
Core inflation - excluding energy, food, alcohol, and tobacco - cooled to 5.8% in January on an annual basis, from 6.3% in December.
‘With UK consumer prices showing signs of stabilization, especially core prices, which reflect domestic dynamics and exclude energy and food imports, the BoE is more likely to bring forward the [relaxation] of its monetary policy. At least this is what investors believe,’ said Ricardo Evangelista, senior analyst at ActivTrades.
James Smith, developed markets economist at ING, said he is still pencilling in a 25 basis hike next month at the Bank of England’s next monetary policy meeting ‘for the time being’.
‘But,’ he added, ‘if this trend in services inflation persists, then it would be a strong argument in favour of pausing in May.’
The pound was quoted at $1.2075 at midday on Wednesday in London, lower compared to $1.2174 at the close on Tuesday.
Russ Mould, investment director at AJ Bell said the ‘divergence in inflation figures’ on either side of the Atlantic‘ resulted in weakness for the pound.
US consumer price inflation slowed in January, according to the latest data from the US Bureau of Labor Statistics on Tuesday.
Annually, consumer price inflation stood at 6.4%, easing slightly from 6.5% in December. The figure came above market consensus, as cited by FXStreet, which expected inflation to slow to 6.2%.
Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.2%, the S&P 500 index down 0.3%, and the Nasdaq Composite down 0.4%.
US retail sales figures will be closely watched at 1330 GMT to provide a fuller picture of the nation’s economy.
‘The US is a nation of shoppers and this is the main gauge of consumer spending which accounts for most of the economic activity in the world‘