UK inflation data came in below expectations. February CPI rose 0.6% MoM (versus 0.7% expected) while inflation slipped to 3.4% in the year (versus 3.5% forecast and 4.0% in January). Core inflation slowed to 4.5% YoY – marginally better than forecast – but services CPI at 6.1% was a tenth above expectations. Despite the positive news, swaps still suggest rate cuts are unlikely to start before August.

Support at or near Tuesday’s 1.2668 low should be firm. An extension lower to 1.2625/1.2635 is a risk below there. But Sterling needs to extend through 1.2725/1.2735 resistance – which has held advances over the past 24 hours – to strengthen.