nflation in the UK in August showed little sign that the sharp depreciation in the Pound following the Brexit vote exerted immediate upward pressure on prices, with both the headline and core measures remaining unchanged last month. Including fuel, consumer prices grew by just 0.6% on a year previous, defying expectations, while the core measure remained unchanged at 1.3%.

Yesterday’s disappointing data comfortably erased all of Monday’s gains, sending Sterling to a two week low against the Dollar and its weakest position versus the single currency since 30 August.

The US Dollar gained against most of its major counterparts on Tuesday, with investors mostly brushing aside earlier comments from Federal Reserve policymaker Lael Brainard, who suggested that an interest rate hike in September was becoming increasingly unlikely.

Brainard voiced concerns about the negative effects on the US economy from abroad, claiming that the Fed would be wise to continue keeping a loose monetary policy stance. Financial markets are now placing around a 15% chance of a hike at the Fed’s meeting next week.

Elsewhere, the Australian and New Zealand Dollars proved to be the big losers of the day, both shedding around 1.3% against the USD as appetite for high-yielding, riskier assets waned.

Another decline in oil prices also proved bad news for commodity driven currencies across the board. Brent crude oil fell over 2% to just above $47 a barrel on Tuesday, sending the heavily oil-dependent Canadian Dollar plunging to its lowest level in a month.

Major currencies in detail:

GBP

The disappointing inflation figures sent Sterling 0.9% lower against both the US Dollar and the Euro on Tuesday.

Yesterday’s inflation data for August came as a bit of a surprise and defied the recent sharp plunge in the Pound following the Brexit vote, the effect of which should have, in theory, pushed up domestic prices. The data will no doubt keep pressure firmly on the Bank of England, which has left the door open to further monetary easing later in the year, having cut rates to a fresh record low 0.25% in August.

Earnings and unemployment data will be the focus in the UK this morning, with another disappointing print likely to heap further misery on Sterling today.

EUR

The Euro was range bound for most of the day on Tuesday, ending unchanged against the Dollar despite a relatively underwhelming set of economic sentiment surveys.

The closely watched economic sentiment indexes from ZEW all missed expectations yesterday, suggesting that investors in the Euro-area remain in a cautious mood following the Brexit vote and the raft of political problems currently plaguing much of Europe. ZEW’s economic sentiment index for the Eurozone rose slightly to 5.4 in September, although fell short of the 6.7 forecast, due in part to an unchanged 0.5 reading in Germany.

ECB President Mario Draghi also spoke yesterday, although failed to touch on monetary policy.

Industrial production is forecast to have fallen sharply in July, with data this morning expected to show output contracted by the most since late-2013. Any figure around the -0.7% consensus would raise serious concerns about the overall health of the overall Eurozone economy and would bode ill for third quarter GDP figures due later in the year.

USD

The US Dollar index rose 0.2% on Tuesday, buoyed by a general aversion to riskier assets.

Economic data out of the US yesterday was very light on the ground, with investors instead awaiting tomorrow’s retail sales figures. Small business optimism did, however, dip slightly in August, with investors citing concerns about the upcoming Presidential Election in November. The index fell by 0.2 points to 94.4.

With mostly second tier economic data out of the US today, traders will have one eye on Thursday’s retail sales figures, which will be the last major economic release before next week’s Federal Reserve meeting.

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