Cable has seen rather choppy price action so far this morning, but presently sits at 1.4995 all but unchanged on the day in Europe. With inflation showing its biggest monthly drop (from +0.5% to -0.2%) since the series began in 1997, we can expect deflationary worries to grow. The prospect of sharply lower UK interest rates and the spectre of a possible deflationary spiral will be serving to undermine the pound somewhat. An early rally reached a session high around 1.5090, before a subsequent sharp sell-off ensued to a low around 1.4960 (post CPI release), and then recovery up to present level. Thin markets are hardly helping matters.