The British pound lingered lower on Tuesday despite official data revealing a bigger-than-expected inflation rise last month. Events today also included markets anticipating the International Monetary Fund (IMF) to cut economic estimates in the wake of the Brexit vote.
Sterling initially capped losses on the inflation beat news and managed to surpass $1.32. However, this gain was brief.
The currency pair GBP/USD traded lower 0.55% to 1.3181 at 09:01 AM GMT, close to levels prior the release. In a likely manner, EUR/GBP was up 0.47% to 0.8392.
The pound previously hit an intraday peak on Monday, after the Bank of England (BoE) policymaker said he was uncertain if he would support a rate cut at the August meeting. These comments contrasted those of other BoE policymakers’ opinions.
In Thursday’s minutes of the central bank’s meeting, policymakers hinted that the bank will ease monetary policy in August to counter the negative economic shock from June 23’s Brexit referendum vote. In a surprise ruling, BoE held interest rates at 0.5%
UK Inflation Increase
Britain’s Office for National Statistics reported that the rate of consumer price inflation (CPI) climbed a seasonally adjusted 0.5% in June, hovering above predications for a 0.4% gain and compared to the 0.3% advance in May.
Data have been collected prior June’s referendum. Economists anticipate the route to raising inflation in the coming months as a weaker sterling supports import prices.
BoE officials will also release their latest estimates for CPI, which may temporarily beat the central bank’s 2% target in 2017 due to a declining sterling, according to economists. The currency has crashed more than 10% against the greenback since Brexit.
The acceleration in annual inflation was set off by an increase in airfares as football fans traveled to France for the 2016 European Championships. Other reasons for the rise were higher prices in some items such as fuel, video games and telephone services.
Wholesale prices tumbled year-on-year last month, with prices charged for manufactured goods at the factory gate falling 0.4% in comparison with 2015. Firms’ raw material costs lost 0.5%.
Meanwhile, UK’s credit worthiness was dragged down by its shock decision to leave the European Union, credit rating agency Moody released in a report.
The report also comprised that medium-term growth prospects for the British economy could be weaker if it does not reach a new trade agreement with Europe, and that there will be a substantial slowdown in growth in the near-term; Moody predicted the country’s growth to be 1.5% this year and almost 1% in 2017.
This report by the credit rating agency was released ahead of the IMF’s own forecasts duet later 13:00 GMT.
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