British Pound (FXB) Soars On Inflation Data

The British Pound (GBP) reached to a new high for more than a year against the US

(

), while trading significantly higher against other major currencies as well after the inflation data for February came out higher than expected, raising expectations among investors of a rate hike by the Bank of England. The consumer price index, the most important indicator of inflation, recorded higher gains than analysts had expected, rising by 0.7% compared to January and 4.4% over the year. Economists had already estimated a rise in inflation by 4.2%, which was still higher than the target rate of the BoE, but the actual gains turned out to be even stronger, thus fueling more speculations that the British monetary authorities will have to raise the interest rates sooner than previously thought. This time the case for a rate hike seems to be stronger, because even the core inflation, which excludes prices for volatile items such as the food and energy, was higher than the estimated gain of 3.1%, coming out at 3.4%, while the retail prices also rose by 1% month over month and by 5.5% annually. As a result, the GBP/USD currency pair rallied to its highest level since January of 2010, reaching as high as 1.6399, although it has retreated a little since, and is currently consolidating at 1.6370s. The British currency moved strongly higher against the Euro (EUR) and the Japanese Yen (

) also, as the EUR/GBP fell from 0.8720s to 0.8660, and the GBP/JPY jumped form 131.70s to 132.97.