FXStreet (Delhi) - Derek Halpenny, Research Analyst at MUFG, notes that the negative sentiment for the pound was on show yesterday with the news of the AB InBev purchase of SABMiller for GBP 68bn failing to provide the pound with support for longer than a few hours. Of course the news was not a huge surprise and was perhaps well priced but the nonetheless, the turnaround during the day highlighted the continued negative sentiment for the pound. Key Quotes “The drop in annual inflation to -0.1% certainly prompted the turnaround although we do not see the data as hugely significant for pound direction beyond the very near-term. The September print meant that the annual average CPI rate in Q3 came in at -0.03% instead of the expected 0.06% projected by the BOE in its latest quarterly inflation report in August.” “Given that the MPC had already indicated that inflation may be lower than anticipated over the short-term in the MPC minutes, the CPI print for Q3 will not be out of line with current BOE thinking. In that sense the data will have little bearing on monetary policy deliberations over the short-term.” “The other factor that undermined the pound was the conclusion of the market that the latest MPC member, Gertjan Vleighe was firmly in the dovish camp. He appeared to focus a lot on the international risks to the UK economy concluding that current risks for the UK economy were to the downside.” “We think that is set to happen as we move toward year-end. The divergence between goods and services inflation is stark. The goods deflation (-2.4%) is down to factors that are far more transient than the factors supporting services inflation (+2.5%) and as the energy price drop fades from the data and the impact of the stronger pound fades as well, the goods deflation will ease notably. Services inflation is trending higher and is now at the highest level since October last year.” For more information, read our latest forex news.