Forex Pros – The pound pared gains against the U.S. dollar on Tuesday, pulling away from a two-day high as markets gauged that higher inflation was unlikely to prompt the Bank of England to raise interest rates before the years end.
GBP/USD pulled back from 1.6303, the pair’s highest since Friday to hit 1.6246 during European early afternoon trade, still up 0.34% on the day.
Cable was likely to find support at 1.6145, Friday’s low and a five-week low and resistance at 1.6379, last Thursday’s high.
Earlier in the day, 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.
Following the data, BoE Governor Mervyn King warned that trying to bring inflation back to the bank’s targeted 2% rate too quickly would risk harming the economy and undershooting the target in the medium term.
Meanwhile, the pound was slightly higher against the euro, with EUR/GBP slipping 0.08% to hit 0.8736.
Later in the day, the U.S. was to publish official data on building permits and housing starts. The country was also to publish government data on the capacity utilization rate and industrial production.
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