The British pound broke through the $2 mark in European trading on Tuesday, its highest level since September 1992 as new United Kingdom inflation data strengthened the likelihood of another interest-rate increase by the Bank of England.
After moving past the $2 mark on the British inflation figures, the pound quickly fell back to $1,9985, up from $1,9900 late on Monday in New York.
David Jones, chief market analyst with CMC Markets, said buyers with his firm had placed orders for the currency as high as $2,0005 before falling back.
”We can confirm that off the back of the … CPI data, [the pound] has traded through the $2 level for the first time since September 1992,” he said. ”So far the move has proved to be unsustainable, but with United States economic data due later in the session, further dollar downside may be seen in due course.”
British inflation accelerated to 3,1% in March, up from 2,8% in February, the government said on Tuesday, and more than the 2,8% that analysts had predicted.
The rising inflation rate, well above the government’s target of 2%, will add to pressure for a further rise in the Bank of England’s base rate, currently 5,25%.
The headline rate of retail price inflation, which includes mortgage interest payments, rose from 4,6% in February to 4,8%, the Office for National Statistics said.
”With [year-on-year] headline inflation above 3% — one point above the Bank of England target — the Bank of England will have to write an explanatory letter to the government,” said Gilles Moec, an analyst with Bank of America in London. ”This will be the first time such a procedure will have to be implemented since the monetary policy reform took place 10 years ago.” — Sapa-AP