The sterling rose against the U.S. dollar on Wednesday following the release of UK inflation data that raised bets that the Bank of England would raise its interest rates at its next policy meeting in September.
Against the greenback, the British pound climbed 0.3% to $1.2736, putting the sterling on track to achieving its largest one-day rise since August 7. The currency also strengthened by 0.1% against the euro, with one euro buying 85.75 pence.
Consumer price inflation in July slowed by 6.8%, however, core inflation, which excludes volatile expenses such as food and energy, remained flat at 6.9% compared to June. Services inflation rose from 7.2% in June to 7.4% in July.
Oliver Blackbourn, Multi-Asset Portfolio Manager at Janus Henderson Investors, explained that stubbornly high core inflation is putting pressure on the Bank of England to extend its interest rate hiking agenda. Blackbourn commented that the BoE “will want to see this less volatile measure decline to suggest that cost pressures are sustainably returning to target.”