Published by Zeb BhamUK inflation in July has fallen slightly and impacted on the sterling currency trading market.Last month saw the headline inflation rate fall from 3.2 per cent to 3.1 per cent. However, it is the seventh month in a row that the rate remains above the crucial three per cent mark.The announcement that the Bank of England governor has again had to explain the results to the government caused sterling to suffer a brief market sell-off.In his letter to the chancellor, Mervyn King explained that the strength of inflation was due to a number of temporary issues such as the rise of VAT from 15 per cent to 17.5 per cent. However, it is expected that inflation is likely to remain above three per cent for some time.Mr King said: "There remains a significant probability that I will need to write further open letters to you in the coming months."By the end of the day, the market rallied ahead on the basis of the forthcoming Monetary Policy Committee (MPC) meeting minutes, which are due to be issued today.The MPC have repeatedly voted to keep the base rate of interest at 0.5 per cent since March 2009.For more information on foreign exchange treasury services and risk management, visit our Corporate FX site