Pound Higher As U.K. Inflation Accelerates To Near 3-year High

The pound strengthened against its major trading partners in the European session on Wednesday, as the nation's consumer inflation accelerated more-than-expected in June, exceeding the Bank of England's inflation target for the second consecutive month.

Data from the Office for National Statistics showed that inflation rose to 2.5 percent in June from 2.1 percent in May. The rate was forecast to climb to 2.2 percent.

The rate was the highest since August 2018.

The annual growth was largely driven by prices of food, second-hand cars and clothing and footwear.

On a monthly basis, consumer prices gained 0.5 percent, following a 0.6 percent rise in May. The expected rate was 0.2 percent.

Core inflation, that excludes energy, food, alcoholic beverages and tobacco, advanced to 2.3 percent in June from 2 percent in May.

Another report from the ONS showed that output price inflation eased marginally to 4.3 percent in June from 4.4 percent in May, while economists had forecast the rate to climb to 4.8 percent.

On month, output price inflation halved to 0.4 percent from 0.8 percent. The expected rate was 0.6 percent.

At the same time, input price inflation slowed to 9.1 percent from 10.4 percent a month ago. Inflation was forecast to advance to 10.8 percent.

Month-on-month, input prices fell 0.1 percent, in contrast to a 1.2 percent rise in May. Economists had forecast prices to rise again by 1.2 percent.

Investors await Powell's testimony on the semi-annual monetary policy report before the House Financial Services Committee in Washington DC later in the day.

Powell's speech could offer more insights about the bank's plans to scale back asset purchase program amid growing price pressures.

The pound drifted higher to more than a 3-month high of 0.8512 against the euro from yesterday's close of 0.8523. The pound is likely to face resistance around the 0.84 region.

The pound rose to a 2-day high of 1.2718 against the franc, from a 5-day low of 1.2662 seen at 5:15 pm ET. The pound may test resistance around the 1.29 level, if it rises again.

The pound reached as high as 1.3862 against the greenback, up from Tuesday's closing value of 1.3801. The currency is seen finding resistance around the 1.41 level.

The pound edged up to 153.14 against the yen, from yesterday's closing quote of 152.72. Next key resistance for the pound is seen near the 155 level.

Looking ahead, Eurozone industrial production for May is due in the European session.

Canada manufacturing sales for May, U.S. producer prices for June and Fed Beige book report will be released in the New York session.

The Bank of Canada will announce its interest rate decision at 10:00 am ET. The BoC is widely expected to keep its policy rate steady at 0.25 percent.

Federal Reserve Chair Jerome Powell is due to testify on the semi-annual monetary policy report before the House Financial Services Committee in Washington DC at 12 pm ET.