Forex Pros – The euro slipped to a three-day low against the pound on Tuesday, after a U.K. government report showed that consumer price inflation jumped to a two-and-a-half year high last month.
EUR/GBP hit 0.8682 during European morning trade, the pair’s lowest since May 12; the pair subsequently consolidated at 0.8704, shedding 0.44%.
The pair was likely to find short-term support at 0.8673, the low of May 12 and a seven-week low and resistance at 0.8799, the high of May 13.
The Office for National Statistics said consumer prices rose 1.0% in April, taking the annual inflation rate to 4.5%, the highest since October 2008. Analysts had expected the annual rate to rise to 4.2% after a surprise dip to 4.0% in March.
Core inflation, which excludes volatile items such as food and fuel, rose to 3.7%, the highest annual rate on record.
The statistics office attributed the unusually late timing of Easter this year for the jump in travel costs which added 0.36% to the change in the annual rate between March and April.
Consumer price inflation has been above the Bank of England’s 2% target since December 2009, and the central bank warned in its inflation report last week that it may rise to 5% this year.
The pound was also higher against the U.S. dollar, with GBP/USD rising 0.51% to hit 1.6275.
Also Tuesday, the ZEW Centre for Economic Research said its index of German economic sentiment fell more-than-expected this month.
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