Prior to the publication of CPI data for the UK the Pound declined modestly against the US Dollar. With economists expecting that UK consumer price inflation accelerated in May the Pound eased away from close to a four-month high against the US Dollar.
The Pound Sterling Exchange Rate was in the region of 1.5678 against the US Dollar as of 10:10 GMT
However, although economists forecast that the annual inflation rate rose from 2.4 per cent to 2.6 per cent last month, according to figures compiled by the Office for National Statistics it actually hit 2.7 per cent.
Prices rose by 0.2 per cent in May month-on-month.
Inflation has been stubbornly above the Bank of England’s 2 percent target for 3 and 1/2 years and is expected to hit 3 per cent at some point this year.
A record leap of 22 per cent in the cost of air fares was largely responsible for inflation’s greater than expected acceleration.
Other contributing factors included a hike in the cost of footwear and clothing.
The Pound dropped against the US Dollar
The Pound dropped to 1.5660 against the US Dollar after the data was published.
This result goes against the Bank of England’s prediction that inflation will fall faster than previously expected.
As one economist noted: ‘Inflation is going to continue to pick up in the near term and will peak at around 3 per cent. The bank is probably a bit optimistic in its forecast for inflation to move down to the target in the medium term.’
Separate data showed that UK house-price inflation eased from 2.7 per cent in March to 2.6 per cent in April. Meanwhile another ONS report showed that month-on-month factory-gate prices were unchanged in May, although up 1.2 per cent on the year.
The UK data saw Sterling decline modestly against the Euro, but the British currency could recoup losses in the hours ahead if the Euro fluctuates in response to news from the Eurozone.
Although ZEW economic sentiment surveys for the Eurozone and Germany exceeded expectations, the German ZEW current situation index unexpectedly dropped from 8.9 to 8.6 in June– economists had expected it to rise to 9.5.
The Pound may experience further movement as the day progresses and US inflation figures are published.
Current Pound Sterling (GBP) Exchange Rates
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The Pound Sterling/US Dollar Exchange Rate is currently in the region of: 1.5678 <
The Pound Sterling/Euro Exchange Rate is currently in the region of: 1.1712 <
The Pound Sterling/Australian Dollar Exchange Rate is currently in the region of: 1.6557 >
The Pound Sterling/New Zealand Dollar Exchange Rate is currently in the region of: 1.9685 >
The US Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6379 >
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8535 >
The Australian Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6039 <
The New Zealand Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5084 <
(As of 10:10 GMT)
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