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Sterling Strikes One-Year High on Inflation Jump

Posted by Joseph Trevisani on Sep 12, 2017 9:45:27 AM

An unexpected surge in U.K. inflation brought the pound to a one-year high against the dollar as traders speculated that the Bank of England will have to raise interest rates sooner than anticipated. Sterling also rose against all its major currency counterparties. 

The consumer price index jumped 0.6 percent in August, beating the 0.5 percent median estimate, far out-stripping July's -0.1 percent reading and tripling the 0.2 percent monthly average this year. Annual inflation rose to 2.9 percent  from the prior month's 2.6 percent for the highest year-on-year reading in four years.

Sterling initially gained 0.9 percent on the dollar reaching 1.3287 its best in a year, before settling around 1.3250  mid-morning in New York.

The pound has now crossed the 38.2 percent Fibonacci retracement of the June 24, 2016 to January 16, 2017 fall, 1.5018-1.1979 for the second time. It traded to 1.3164 onAugust 3rd but subsequently dropped back to 1.2797.  Prospects for continuing gains are considerably higher this time. around.

gbp fib sept 12.png


Chart: Thomson/Reuters



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