Investing.com - The pound rallied to session highs against the dollar and the euro on Tuesday after data showed that U.K. consumer prices rose unexpectedly last month, adding to pressure on the Bank of England to raise interest rates.
GBP/USD was up 0.53% to 1.5669 from around 1.5598 ahead of the data.
The move higher in sterling came after the Office for National Statistics said the consumer price index ticked up 0.1% in July compared to the same month last year after falling to zero in June.
Economists had expected a flat reading.
The slight increase was due mainly to smaller price reductions on clothing compared to a year ago, the ONS said.
On a monthly basis, consumer prices were 0.2% lower in July.
Core inflation, which strips out volatile factors like energy and food, rose to a five month high of 1.2% last month from 0.8% in June, indicating that underlying inflationary pressures are building.
Investors had recently pushed back expectations on the timing of an initial rate hike by the BoE after just one member of the monetary policy committee voted to raise interest rates last month.
A separate report on Tuesday showed that U.K. house prices rose 5.7% in the year to June, up from 5.6% in May.
Sterling hit one-week highs against the euro, with EUR/GBP down 0.56% to 0.7067 from 0.7106 earlier.