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Pound gains as U.K. inflation approaches BoE target

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Investing.com - The pound rose against the dollar on Tuesday after the U.K. inflation rate approached the Bank of England's target and drew applause from markets, though solid U.S. retail sales data gave the dollar some support and capped the pound's advance.

In U.S. trading on Tuesday, GBP/USD was trading at 1.6446, up 0.38%, up from a session low of 1.6367 and off a high of 1.6464.

Cable was likely to find support at 1.6347, Monday's low, and resistance at 1.6508, Monday's high.

The U.K. Office for National Statistics reported earlier that its consumer price index rose 2.0% on year last month, off from November's 2.1% reading in November and just shy of consensus forecasts calling for an unchanged reading.

Still, it was the first time since 2009 that the U.K. inflation rate came in line with the Bank of England's official 2% target, which strengthened the pound though the pair remained range bound.

Consumer prices rose 0.4% month-on-month, below expectations for a 0.5% rise.

Core CPI, which excludes food, energy, alcohol, and tobacco costs rose 1.7% in December, down from 1.8% in November and off expectations for an unchanged reading.

The U.K. house prices index climbed 5.4% in November, the ONS added, below expectations for a 5.9% gain.

Meanwhile in the U.S., the Commerce Department reported earlier that U.S. retail sales rose 0.2% in December, beating expectations for a 0.1% increase.

Core retail sales, which exclude automobile sales, expanded by 0.7% in December, well above forecasts for a 0.4% increase.

The news sparked demand for the dollar by cementing expectations for the Federal Reserve to continue scaling back its USD75 billion bond-buying program this year.

Fed asset purchases soften the greenback by depressing long-term interest rates to encourage investing and hiring, thus making stocks more attractive while such programs remain in place.

On Friday, the Bureau of Labor Statistics reported that the U.S. economy added 74,000 jobs in December, well below expectations for a 196,000 increase, which spooked markets though by Tuesday, investors began to view the figure as an anomaly and likely the product of rough winter weather that disrupted hiring.

Sterling was higher against the euro, with EUR/GBP down 0.31% to 0.8318, and up against the pound, with GBP/JPY up 1.36% as 171.02.

On Wednesday, the U.S. is to release data on producer price inflation and a report on manufacturing activity in the New York region.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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