Pound Advances As U.K. Inflation Accelerates To 10-year High

The pound drifted higher against its major counterparts in the European session on Wednesday, as the nation's inflation soared to a 10-year high in October, adding to hopes for a rate hike by the Bank of England next month.

Data from the Office for National Statistics showed that UK inflation accelerated more than expected in October.

Consumer price inflation advanced to 4.2 percent from 3.1 percent in September. The rate was forecast to climb to 3.9 percent.

The upward pressure was largely driven by the surge in the cost of housing and transport.

On a monthly basis, consumer prices were up 1.1 percent versus September's 0.3 percent rise and economists' forecast of 0.8 percent.

Core inflation that excludes energy, food, alcoholic beverages and tobacco, rose to 3.4 percent in October from 2.9 percent in September. The expected rate was 3.1 percent.

Another report from the ONS showed that output price inflation increased to 8 percent from 7 percent in September. This was also above economists' forecast of 7.3 percent.

Similarly, input prices advanced at a pace of 13.0 percent annually, following the 11.9 percent increase a month ago.

Month-on-month, output prices gained 1.1 percent compared to a 0.7 percent rise in September. Economists had forecast prices to increase 0.8 percent.

At the same time, input prices climbed 1.4 percent on month after a 0.8 percent rise in the previous month. The expected rate was 1.1 percent.

The latest data is likely to add pressure on BoE policymakers to lift interest rate at its meeting in December.

The GBP/JPY pair touched nearly a 2-week high of 154.74, up from Tuesday's close of 154.16. The pound is seen finding resistance around the 156.00 level.

The GBP/CHF pair jumped to its highest level since October 29, at 1.2547. The pair had closed yesterday's trading at 1.2476. The pound may challenge resistance around the 1.28 level, if it rises further.

The GBP/USD pair recorded a weekly high of 1.3474 following the data, after touching a 5-day low of 1.3396 at 10:30 pm ET. The pound is likely to find resistance around the 1.37 level.

The EUR/GBP pair dropped to 0.8389, a level unseen since February 2020. At yesterday's close, the pair was valued at 0.8426. Next key resistance for the pound is seen around the 0.82 level.

Looking ahead, Eurozone CPI for October and construction output for September are due in the European session.

Canada CPI and U.S. housing starts and building permits, all for October, are scheduled for release in the New York session.