LONDON: Sterling edged back above $1.30 on Wednesday after data showed British inflation unexpectedly hitting a six-month high in January, confirming expectations that the Bank of England would not be cutting interest rates any time soon.
Consumer prices rose at an annual rate of 1.8% compared with 1.3% in December, not far off the Bank of England’s 2% target, the Office for National Statistics said. A Reuters poll of economists had pointed to a rate of 1.6%.
The pound which had traded below the $1.30 mark in early London trade, rose back into positive territory after the data and stood at $1.3017, up 0.16% on the day.
Versus the euro, the pound had started the day down 0.25% but rose back to trade flat against the single currency.
Money markets have priced out the probability of a full 25 basis point rate cut from the Bank of England this year, betting an expansion in spending will boost growth and inflation.
The pound last week enjoyed its best weekly performance in two months, strengthening on bets that new UK finance minister Rishi Sunak would open the fiscal taps to boost an economy weakened by three years of Brexit uncertainty.
The currency got a boost on Tuesday when Sunak tweeted he expected to present the budget on March 11 as previously scheduled.
British government bonds and the FTSE equity index did not react to the inflation figures.
Sterling back above $1.30 on higher-than-forecast inflation data
