'This will kill chances of rate rise': Sterling falls on surprise inflation drop to 2.6% in June

Falling petrol and diesel prices main contributors

Sterling fell in mid-morning trading on the announcement UK inflation unexpectedly fell to 2.6% over the 12 months to June 2017, down from 2.9% in May.

The figure, released by the  Office for National Statistics (ONS) comes as a surprise as economists had forecast it would hold at the four-year high of 2.9% reached in May. As a result, sterling fell 0.18% from $1.3055 to $1.3020 as investors began to reduce expectations of an interest rate hike in August. Falling petrol & diesel prices were the main contributors to the drop in the Consumer Prices Index (CPI) annual rate, while the growth rate of factory gate prices also fell to 3.3% from 3.6%. Meanwhile, core inflation - which excludes volatile food and energy prices - also slip...