The Pound Exchange Rate made sharp gains against the majority of its most traded peers on Tuesday after data showed that UK inflation jumped to 1.9% in June boosting speculation that an interest rate rise by the Bank of England could occur before the end of the year.
Against the US Dollar the Pound surged by half a cent to $1.713 against the Euro it advanced to 1.259 and made solid gains against the majority of other currencies.
According to the Office for National Statistics (ONS) consumer prices increased by 1.9% on a year-on-year basis last month, climbing from the 1.5% recorded in May and was well above economist expectations for a figure of 1.6%.
Consumer prices ticked up by 0.2% last month, the ONS said, compared to estimates of a 0.1% decline. The retail price index, a broader measure of the cost of living, rose to 2.6% in June from 2.4% in May.
The ONS said that the rise was a result of strong showings in clothing and food prices.
The overall prices for clothing goods rose by 0.6% between May and June and are a sharp contrast to the 1.9% decline seen last year in the same period.
Adding to the positive news was the publication of the separate house price index which climbed 10.5% in the year to May from the previous month’s figure of 9.9%.
‘The inflation data will encourage those economists and rate watchers looking for a tightening of Bank of England monetary policy this year, but for those who are seeing below inflation wage increases, the situation just got a little more painful,’ said an economist.
Tuesday’s data adds to signs that the UK economy is continuing to strengthen broadly and as the interest rate has now advanced to just 0.1% away from the Bank of England’s target of 2% calls for an interest rate rise are sure to grow louder.
‘The government’s long term economic plan is working, with today marking the 6th consecutive month that inflation has been below the Bank of England’s two per cent target. But the effects of the great recession are still being felt and so we have taken continued action to help with the cost of living, including cutting income tax, freezing fuel duty and reducing the costs of childcare. The job is not yet done and the biggest risk to the recovery would be abandoning the plan that’s delivering a brighter economic future,’ said a HM Treasury spokesman.
BoE Governor Mark Carney is due to address parliament so further gains for the Pound is not out of the question if he adds to the speculation of a rate rise. Any dovish comments however could see Sterling give back some of its gains.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.7130 ,
Pound Sterling,,Euro,1.2592 ,
Pound Sterling,,Australian Dollar,1.6219 ,
Pound Sterling,,New Zealand Dollar,1.9406 ,
US Dollar,,Pound Sterling,0.5834 ,
Euro,, Pound Sterling ,0.7940 ,
Australian Dollar,, Pound Sterling ,0.5488 ,
New Zealand Dollar,,Pound Sterling,0.5148 ,
[/table]
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