British Pound Declines as UK Inflation Disappoints Expectations

The British pound fell against the US dollar and the euro on Monday, after fresh data for inflation in the United Kingdom showed that it remained below estimates.

The British Office for National Statistics released its report for UK consumer price inflation in January, which stated that consumer prices rose by 1.8% in the twelve months to January. The inflation index rose from a reading of 1.6% in the twelve months ending December 2016, but still missed forecasts of a rise of 1.9% in January. At 1.8%, consumer prices had their strongest gain since June 2014.

The report added that the core consumer prices index rose by 1.6%, which compares to expectations of 1.8%. The index, which excludes fuel prices, signaled that economic growth in the United Kingdom is yet to stimulate stronger inflation. Today’s report said that the main contributor to the increase in January was higher fuel prices.

On the negative side, prices for clothing and footwear declined in January to offset upward inflationary pressures. The Bank of England closely tracks the UK inflation to decide its monetary policy, and today’s report gives the central bank less reasons to consider raising its interest rate in the near future.

GBP/USD traded at 1.2470 as of 19:45 GMT on Tuesday, after touching 1.2447 at 17:30 GMT, the pair’s lowest level since February 10. GBP/USD started trading today at 1.2525.

EUR/GBP was at 0.8476, from 0.8527 at 11:50 GMT, the pair’s strongest rate since February 10. EUR/GBP started the day at 0.8461.

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