FX round-up: Sterling mostly lower after consensus-beating CPI rise

Sterling ended up mostly lower on key crosses Tuesday, but up on the US dollar, in the aftermath of a higher-than-expected print on UK inflation for April.

UK's consumer-price index rose 2.7% in April on the year, from 2.3% in March and above a consensus view that 2.6% be the reading. This was its highest since 2013.

"Inflation above wage growth has negative implications for consumer spending and outlook for the British economy," said Jasper Lawler, senior market analyst at London Capital Group.

"The cost of living squeeze will likely be enough to dissuade the Bank of England from acting to control the higher inflation with rate hikes."

The rising UK inflation is the result of its vote in favour of Brexit in a non-binding referendum in mid-2016.

Chris Saint, senior analyst at HL Currency Service, said sterling's fall in response to today's data suggested markets still didn't see this as adding too much pressure on the Bank of England to lift interest rates anytime soon.

"Tomorrow's employment market report and Thursday's retail sales data therefore take on added significance."

Michael Hewson, chief market analyst at CMC Markets UK, said sterling had struggled to make gains despite the latest CPI data.

"Given this sudden rise (in CPI) it becomes that much more important that tomorrow's wages data is able to keep up to mitigate further strain on consumer budgets."

At about 17:07 BST, sterling was up 0.12% to $1.2911, but down 0.76% to €1.1661. The dollar was down 0.86% to €0.9033.

Lawler noted that GDP data showed the Eurozone economy growing at 1.7% on the year.

"It's hardly blow-your-socks-off growth in Europe but it is being viewed positively in the context of fading European political risk," he said.

"Since currencies are always a play on the relative strengths of two economies, the rising threat of political fallout in the US under Donald Trump is another boon for the euro."

Meantime, sterling was down on the aussie, loonie and yen, but up on the kiwi and rand. The dollar was widely lower, falling against all of these currencies.

"The US dollar has continued to come under pressure today as expectations of over US interest rates rises continue to weigh on the greenback," added Hewson.

"While markets continue to expect a rate rise in June expectations around future rises are being tempered by recent weakness in economic data as well as some concern about political turmoil in Washington DC as another media storm hits the Trump presidency."