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Forex - Sterling pares back gains as U.K. inflation slows

Published 05/17/2016, 05:17 AM
© Reuters.  Sterling trims gains after weak U.K. inflation data
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Investing.com - The pound pared back gains against the dollar on Tuesday after data showing that the rate of inflation in the U.K. slowed in April for the first time since September 2015.

GBP/USD was last at 1.4458, down from around 1.4494 ahead of the report.

The Office for National Statistics reported that the consumer price index rose by an annualized 0.3% in in April, slowing from 0.5% in March.

Economists had expected the rate of inflation to remain stable at 0.5%.

Consumer prices rose just 0.1% from a month earlier in April, slowing sharply from 0.4% in March and below forecasts for a gain of 0.3%.

Falling air fares and price drops for clothing, vehicles and rent charged for social housing were the main contributors to the slowdown in inflation, the ONS said.

Air fares fell by 14.2% in April, having jumped in March to take advantage of holidaymakers travelling for Easter.

Core inflation, which strips out changes in the price of energy, food, alcohol and tobacco, fell to 1.2%, falling short of economists' expectations for 1.4%.

The weak data indicated that the Bank of England will be in no rush to raise interest rates from record lows of 0.5%, where they have been for almost seven years.

In a separate report, the ONS said U.K. house prices jumped 9% on a year-over-year basis in March, the largest rise in a year, as buyers rushed to beat a stamp duty increase on buy-to-let properties.

Sterling was higher against the euro, with EUR/GBP down 0.47% at 0.7824.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 94.54, easing back from Friday’s highs of 94.84, the strongest level since late April.

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