The Pound rose to the sessions high against the Greenback after the release of last month’s consumption data, which signalled that inflation in the UK rose to a four-year peak. This added concerns about the rising living costs, which further hampers the household consumption growth.
The UK statistics bureau reported that the annual inflation accelerated to 2.9% in May compared to the forecast of 2.7%. Rising inflation pace is associated with higher prices of food, energy and recreational products.
The main growth factor was the increase in weekend holidays costs outside the UK, as there was significant Pound depreciation after the Brexit vote. At the moment, inflation growth is higher than the BoE target level. In the May inflation report, the Bank of England forecasts that inflation will accelerate to a maximum of 2.8% in the fourth quarter. It is anticipated though that the Bank of England will keep the interest rate at the current level when announcing the monetary policy decision on Thursday. Given the fact that the inflation is outpacing the wages growth in the UK, the Bank of England has already warned that the living standard will decline as the Pound depreciation will affect the prices.
Euro rose slightly against the Dollar and the decline against a basket of majors after the release of confidence data on the EU region. According to a report released on Tuesday, the German investors’ sentiments eased slightly in June, after a nearly two-year high in May. The monthly report of the Center for European Economic Studies (ZEW) said that the ZEW economic sentiment index in Germany fell to 18.6 this month compared to 20.6 in May. Economists predicted that the value of the index would be 21.5. The index of the current economic conditions of ZEW in Germany rose to 88.0 in June against a value of 83.9 in May and is compared with growth forecasts of 85.0. Thus, the highest indicator of this index was recorded since July 2011.
On Tuesday, the Canadian Dollar rose against the US Dollar to a maximum of two months after the central bank of Canada announced the odds of an interest rate increase. Bank of Canada said on Monday that the policymakers would consider whether to maintain a low-interest rate, given the continued growth of the economy. The pair USD/CAD dropped 0.38% to 1.3273. During the Asian trades, it fell to 1.3269 – the lowest level since April 17.
The US currency remains stable, as long as investors are waiting for the results of the FED meeting this week.
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