Last week, the Bank of England cut interest rates for the first time in 2 years, which should have been bearish for the British pound, but wasn’t. At that time, the market did not think about what the rate cut meant, but instead about whether it would be the one and only rate cut from the BoE this cycle. This suspicion was first raised by the statement released by the central bank, which was not entirely dovish. Today, that suspicion was confirmed by producer prices, which grew by the fastest pace since 1991. Food and energy prices have been on the rise and we are finally seeing that upside pressure being passed on to consumers. This pace of producer price growth will make it difficult for the Bank of England to cut interest rates again when they meet in January, unless the UK economy slows materially. Tomorrow we are expecting the UK trade balance. Firm industrial production should help reduce the trade deficit.