British Pound Climbs vs. Euro and US Dollar on Strong Inflation Data



A fan of 20-pound billsThe British pound moved higher versus the euro and the US dollar on Tuesday, driven by gains in UK inflation and home prices that were bigger than expected. However, negative producer prices data limited the pound’s climb today.

A weaker British pound in recent months seem to have contributed to higher inflation in the United Kingdom. The UK Office for National Statistics released a report earlier today that said that the consumer prices index rose 2.9% over a period stretching 12 months and leading to May, from 2.7% in April.

The gain marked the highest in record since July 2013, following gradual increases for the consumer prices index since a period of low inflation in 2015. On a monthly basis, the index rose 0.3% last month following a gain of 0.5% in the previous month, which beat estimates of a 0.2% increase. The increase was largely due to higher prices for food, electricity, and recreational and cultural goods and services.

A separate fresh reading for the house price index that was published also today added to signals of rising inflation in the United Kingdom. The index rose 5.6% between April 2016 and April 2017, up from 4.5% in the year leading to March 2017. The reading exceeded expectations of a 3.7% yearly gain and was the strongest since a 5.7% gain in October 2016, however it still continued a trend of slower annual growth rates since June 2016.

The British pound failed to capitalize on today’s positive data as producer prices remained weak. A third report released by the Office for National Statistics at 8:30 GMT today showed that the input producer price index declined 1.3% in May following a 0.3% drop in April, despite forecasts of a smaller 0.5% decline.

The index’s annual rate was 11.6% last month, which extended a downtrend from 19.9% in January 2017 and reflected easing input cost pressures in the manufacturing sector. On the other hand, the output producer price index displayed a small downward movement to 0.1% in May from 0.4% in April, while remaining unchanged on a yearly basis at 3.6%.

GBP/USD climbed to 1.2746 as of 17:10 GMT on Tuesday from 1.2669 when trading began today. GBP/USD touched 1.2752 at 16:30 GMT today, the pair’s highest level since yesterday.

EUR/GBP declined to 0.8788 after touching 0.8781 at 16:30 GMT, a level which was also last seen yesterday. EUR/GBP started the day at 0.8838.

If you have any questions, comments or opinions regarding the Great Britain Pound,
feel free to post them using the commentary form below.

<a href="http://www.instaforex.com/?x=XWD" target="_blank" rel="nofollow" >InstaForex</a>

Loading Facebook Comments ...

Leave a Reply