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DailyFX European Market Wrap: UK Inflation Rise Sparks British Pound Rebound

DailyFX European Market Wrap: UK Inflation Rise Sparks British Pound Rebound

Katie Pilbeam, Contributor


UK inflation rises to the highest rate since June 2013 from 2.7% to 2.9% - keeping it above the Bank of England's 2% target. The cost of foreign package holidays for British tourists was one of the main reasons as well as rising prices for recreational and cultural goods and services - particularly games, toys and hobbies.

This is mostly due to the fall in the value of the pound since last year's EU referendum which has increased the cost of imports.

Sterling trades at 1.27257 against the US Dollar on Tuesday afternoon up from 1.26243 in early turnover. The pair have now bounced off the 100-day moving average in three out of the last four trading session.

According to a new Reuters poll, two thirds of economists questioned believe there is now less chance of a ‘hard Brexit’ since the UK election but it also concluded that the pound may weaken further against other currencies.

The EU is set to propose control over the clearing of euro-denominated derivatives, which could force firms to move from London to the EU in the wake of Brexit. Bringing euro clearing all back to the continent is believed to be one of the EU’s top demands in the Brexit talks.

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--- Written by Katie Pilbeam, DailyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.