The British pound strengthened against the other major currencies in the early European session on Tuesday, after data showed that U.K. inflation accelerated unexpectedly in May and factory gate prices continued to increase.
Data from the Office for National Statistics showed that U.K. inflation rose to 2.9 percent in May from 2.7 percent in April. Economists had forecast the annual rate to remain unchanged at 2.7 percent. This was the highest inflation since 2013.
On a monthly basis, consumer prices gained 0.3 percent, slightly faster than the 0.2 percent increase economists had forecast.
Another report from the ONS showed that output price inflation held steady at 3.6 percent in May. The rate came in line with expectations.
At the same time, input price inflation eased to 11.6 percent from 15.6 percent, while economists forecast it to slow moderately to 13.5 percent.
Month-on-month, output prices edged up 0.1 percent compared to a 0.4 percent increase in April. Meanwhile, input prices fell 1.3 percent, following a 0.3 percent drop.
Traders await the U.S. Federal Reserve’s two-day policy meeting that kicks off later today.
The Fed is widely expected to hike its fed funds rate by 25 basis points, but investors will parse the policy statement for any fresh hints on the pace of further tightening.
The Bank of England and the Bank of Japan will announce their monetary policy decisions on Thursday and Friday, respectively.
In the Asian trading today, the pound had risen against its major rivals.
In the early European trading, the pound rose to 0.8815 against the euro and 1.2299 against the Swiss franc, from early lows of 0.8852 and 1.2244, respectively. If the pound extends its uptrend, it is likely to find resistance around 0.86 against the euro and 1.26 against the franc.
Against the U.S. dollar and the yen, the pound edged up to 1.2714 and 140.09 from early lows of 1.2642 and 138.95, respectively. The pound may test resistance near 1.28 against the greenback and…