Heavy US dollar tone offers sterling some reprieve - BBH

Research Team at BBH, suggests that the heavy US dollar tone offers sterling some reprieve after yesterday, it finished the North American session at its lowest level in more than 30 years (~$1.2880). 

Key Quotes

“Despite today's recovery, it has been unable to resurface above previous support around $1.30.  The July inflation report had been cited as the first "hard data" since the referendum, but the impact of sterling's sharp drop is barely detectable. Consumer prices slipped 0.1% on the month, while the year-over-year pace quickened to 0.6% from 0.5%.  The core rate eased to 1.3% from 1.4%.   That said, import prices did surge.  The 6.5% annualized pace is the most since the end of 2011.

To be sure, the Bank of England expects the decline in sterling to boost measured inflation.  However, it recognizes it as a transitory phenomenon.  Policymakers want to look through it.  The prospect of currency-induced price pressures (as opposed to, say, capacity constraints) has not and will not prevent the BOE from easing policy.  Sterling's weakness and the decline in interest rates help cushion the economic shock for the UK.”