The first important economic report from Great Britain for this week, inflation data, was released and it turned out to be better than expected. As a surprising twist, the pound sank after the positive report, though it is attempting to recover as of now. The sterling gained on the dollar, was flat versus the Japanese yen and fell against the euro.
The Consumer Price Index rose 1.8 percent in April, up from 1.6 percent in March, while the median forecast predicted 1.7 percent growth. The report said:
Increases in transport costs, notably air fares, sea fares and motor fuels, provided the largest contribution to the rise in the rate.
It also mentioned that “the timing of Easter is likely to have had an impact on the index”.
So why the sterling weakened even though the data was good? There is possibility that Forex traders used the strategy “buy the rumor, sell the fact”. Whatever the case, it looks like the pessimistic outlook for the currency was warranted, at least as of the present time.
GBP/USD advanced from 1.6812 to 1.6833 as of 11:50 GMT today, reaching the high of 1.6863 intraday. GBP/JPY was at about 170.60, near the opening level of 170.64. EUR/GBP dipped from 0.8151 to 0.8118, the weakest rate since January 2013, before trading at 0.8139.
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