Forex News: Pound Rises As UK Inflation Hits 18-Month High

Pound Rises As UK Inflation Hits 18-Month High

(RTTNews) - The British pound strengthened against other major currencies in the European session on Wednesday, as the UK consumer price inflation accelerated to an 18-month high in July on airfares and food prices, suggesting that the Bank of England is likely to delay further easing.

Data from the Office for National Statistics showed that the U.K. consumer price index posted an annual growth of 3.8 percent after rising 3.6 percent in June. Inflation continued to remain stubbornly above the 2 percent target and hit the highest since January 2024, when the rate was 4 percent. Prices were forecast to climb 3.7 percent in July.

Core inflation that excludes prices of energy, food, alcohol and tobacco, rose to 3.8 percent from 3.7 percent in June.

On a monthly basis, consumer prices rose only 0.1 percent, following June's 0.3 percent gain.

Food and non-alcoholic beverages prices were up 4.9 percent and transport cost moved up 3.2 percent due to the surge in airfares.

Annual growth in goods prices increased to 2.7 percent from 2.4 percent. Likewise, services inflation rose to 5 percent from 4.7 percent.

At the August monetary policy meeting, the BoE had reduced its benchmark interest rate in a close call as members became more concerned about persistent inflation. The current 4.00 percent interest rate is the lowest since early 2023.

Traders await the release of the minutes of the US Fed's latest monetary policy meeting in the day and the Jackson Hole Economic Symposium that gets underway on Thursday.

Fed Chair Jerome Powell is scheduled to speak at the symposium on Friday, with remarks potentially impacting the outlook for interest rates.

According to CME Group's FedWatch Tool, there is an 86.9 percent chance the Fed will lower interest rates by a quarter point at its next monetary policy meeting in September.

Stagflation concerns are on the rise and markets are currently looking forward to at least a 25-basis-point rate cut at the September FOMC meeting.

In the European trading today, the pound rose to a 5-day high of 0.8609 against the euro and a 2-day high of 1.0920 against the Swiss franc, from early lows of 0.8636 and 1.0890, respectively. If the pound extends its uptrend, it is likely to find resistance around 0.84 against the euro and 1.10 against the franc.

Against the U.S. dollar and the yen, the pound edged up to 1.3510 and 199.45 from an early 8-day low of 1.3462 and a 6-day low of 198.63, respectively. The pound may test resistance around 1.37 against the greenback and 201.00 against the yen.

Looking ahead, U.S. MBA mortgage approvals data, Canada new housing price index for July and U.S. EIA crude oil data are due to be released in the New York session.

At 2:00 pm ET, U.S. FOMC minutes of its latest monetary policy meeting is set to be published.

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