Sterling sheds day’s gains as UK inflation slows
Investing.com - The pound fell to the day’s lows on Tuesday, shedding early gains after data showing that the annual rate of inflation in Britain fell for the first time since October last month.
GBP/USD was down 0.25% to 1.3024 by 05.11 a.m. ET (09.11 a.m. GMT), off an earlier high of 1.3125.
The Office for National Statistics said consumer prices rose 2.6% in June, down from an almost four-year high of 2.9% in May.
Economists had expected the inflation rate to remain unchanged.
It was the largest decline in inflation since February 2015, easing pressure on the Bank of England to raise interest rates.
Inflation has accelerated sharply since last year’s Brexit vote as the steep fall in sterling pushed up import prices, leading to fears over a squeeze on living standards with wages lagging rising prices.
The BoE is to hold its next policy meeting on August 3. At the bank's June meeting three policymakers voted in favor of hiking rates, although one of those officials has since left.
Sterling was at the day’s lows against the euro, with EUR/USD advancing 0.66% to 0.8850.
Meanwhile, the U.S. dollar was at 10-month lows against a basket of the other major currencies, after an attempt to pass healthcare reform collapsed and investors remained doubtful over the Federal Reserve’s rate hike plans.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.33% to 94.61.
The index touched an overnight low of 94.50, the lowest trough since September 9, 2016.
A second attempt by Republicans to replace Obamacare collapsed late Monday, delivering a major policy blow to the Trump administration.
Around half of the cuts in health-care spending were earmarked to finance proposed tax cuts. The failure to deliver healthcare reform added to disappointment over the progress of President Donald Trump’s economic agenda.
The dollar was already on the defensive after Friday’s weak U.S. inflation and retail sales data added to doubts that the Fed will be able to raise interest rates again this year.
Related Articles
Forex - Dollar index extends losses as selloff deepens