Pound Climbs As U.K. Inflation Data Backs BoE Rate Hike Bets

(RTTNews) - The pound appreciated against its major counterparts in the European session on Wednesday, as the nation's consumer inflation came in line with expectations in July, reinforcing expectations that the Bank of England will raise interest rate again at its next monetary policy meeting in September.

Data from the Office for National Statistics showed that consumer price inflation slowed to 6.8 percent in July, as expected, from 7.9 percent in June.

Core inflation held steady at 6.9 percent in July, while the rate was forecast to slow to 6.8 percent.

On a monthly basis, consumer prices dropped 0.4 percent, in contrast to the 0.1 percent rise in June. Economists expect consumer prices to fall 0.5 percent.

Another data from the ONS showed that input prices posted the lowest annual rate since May 2020. Input prices were down 3.3 percent after a 2.9 percent decrease in the previous month.

Month-on-month, input prices slid 0.4 percent, but slower than the 1.3 percent decline registered in June. The monthly rate has been negative for seven of the past nine months.

At the same time, output prices declined for the first time since December 2020. Factory gate prices slid 0.8 percent, offsetting June's 0.3 percent increase. Output prices gained 0.1 percent, following a 0.2 percent fall in June.

The pound touched 185.73 against the yen, its highest level since December 2015. On the upside, 188.00 is seen as its next resistance level.

Against the franc and the greenback, the pound firmed to a 2-week high of 1.1210 and a 6-day high of 1.2766, respectively. The pound is seen facing resistance around 1.15 against the franc and 1.30 against the greenback.

The pound was up against the euro, at a fresh 2-week high of 0.8564. If the currency rises further, 0.84 is likely seen as its next upside target level.

Looking ahead, U.S. weekly MBA mortgage approvals data, U.S. and Canada housing starts data for July, U.S. preliminary building permits data for July, U.S, industrial and manufacturing productions data for July and U.S. EIA crude oil data slated for release In the New York session.

The Fed minutes from the July 25-26 meeting will be released at 2 pm ET.