Pound Rises as U.K. Inflation Exceeds BOE's Target


The pound rose the most against the dollar in a month and rebounded from a record low versus the euro as inflation unexpectedly held above the Bank of England's 2 percent target for a third month, reducing pressure on policy makers to cut interest rates.

The pound advanced against 15 of the 16 most-traded currencies tracked by Bloomberg as consumer prices increased 2.1 percent in December from a year earlier, the same as the previous month. The U.K. currency extended its gains after a Commerce Department report showed sales at U.S. retailers unexpectedly fell in December, capping the weakest year since 2002.

Britain's currency rose as much as 0.9 percent, the most since Dec. 12, and was at $1.9728 by 2:40 p.m. in London, from $1.9559 yesterday, when it declined to a 10-month low.

It snapped four days of losses versus the euro, gaining to 75.58 pence, after earlier sliding to 76.14, from 76.01 Jan. 14.

Oil prices around $100 a barrel and higher food prices are pushing up the cost of living and fueling inflation in Britain. Economists had expected prices to increase 2 percent, according to the median of 34 forecasts in a Bloomberg News survey. Prices rose 0.6 percent in the month, the Office for National Statistics said in London today.


TradingEconomics.com, Bloomberg
1/15/2008 10:00:03 AM