Tuesday, 17 November 2015 18:11
LONDON: Sterling rose to three months highs against the euro and turned higher against the dollar on Tuesday, after data showed core British inflation rising at a slightly faster pace than expected in October.
Official data showed that while headline consumer price inflation came in line with expectations, core inflation, which strips out volatile items, rose 0.3 percent in October, from a month earlier, higher than forecasts of 0.1 percent.
Sterling rose to $ 1.5215 after the data from around $ 1.5173 beforehand, and turning flat on the day after having traded lower against the dollar for most of the session.
The euro fell to 70.05 pence, its lowest since August 6 and down 0.3 percent on the day.
“Sterling is finding some comfort from the data,” said Tobias Davis, corporate hedging manager at Western Union Business Solutions. “The market was expecting a slight softer print and were positioning themselves with this in mind.”
Sterling has been pegged back in the past few days by comments from a senior Bank of England policymaker, Andy Haldane, who said an interest rate hike by the U.S. Federal Reserve would not automatically lead to a response in Britain.
Before that, Governor Mark Carney cooled expectations of a rate hike, citing increased risks to UK growth from external developments. Analysts said this showed the BoE was growing increasingly nervous about the currency’s strength, with trade-weighted sterling having risen 6.2 percent this year.
Investors are pricing in the chance of a rate hike in sometime in the second half of 2016 and the latest inflation data did little to alter those expectations. The focus now turns to US inflation data, due to be released later in the day.
British government bond futures edged lower after the data to reach a session low of 117.34, down 17 ticks on the day.
