Pound Appreciates As U.K. Consumer Inflation Surges Past BoE Target

The pound climbed against its major counterparts in early European deals on Wednesday, following a jump in the nation's consumer prices for May, which was well above the Bank of England's target of 2 percent.

Data from the Office for National Statistics showed that consumer price inflation accelerated to 2.1 percent in May from 1.5 percent in April. This was above economists' forecast of 1.8 percent and the Bank of England's target of 2 percent.

Excluding volatile energy, food, alcoholic beverages and tobacco prices, core inflation rose to 2 percent in May from 1.3 percent in April. The rate was forecast to rise to 1.5 percent.

The monthly growth in consumer prices held steady at 0.6 percent, while it was forecast to ease to 0.3 percent.

Another report from the ONS showed that output price inflation came in at 4.6 percent versus 4.0 percent in April and economists' forecast of 4.5 percent.

At the same time, input price inflation increased to 10.7 percent from 10.0 percent in April. This was the highest rate since September 2011 and above the expected rate of 10.6 percent.

Month-on-month, output prices gained 0.5 percent, slightly faster than the 0.4 percent rise seen in April. At the same time, input price growth slowed marginally to 1.1 percent from 1.2 percent.

The pound's rise was further driven by a subdued demand for the dollar, ahead of the latest monetary policy decision by the U.S. Federal Reserve.

The Fed's two-day policy meeting ends later in the day, although it is unlikely to change its current monetary settings.

Markets seek more clarity about the withdrawal of the QE program that have been in place to fight the pandemic.

The pound was up against the greenback, at 1.4123. If the pound rises further, 1.43 is likely seen as its next resistance level.

The pound reached as high as 155.38 against the yen, compared to Tuesday's close of 154.92. The pound is seen facing resistance around the 157 level.

Data from the Ministry of Finance showed that Japan posted a merchandise trade deficit of 187.1 billion yen in May.

That missed expectations for a shortfall of 91.2 billion following the downwardly revised 253.1 billion yen surplus in April.

The pound edged up to 1.2688 against the franc from Tuesday's closing value of 1.2632. The pound may find resistance around the 1.28 level.

The U.K. currency gained against the euro, with the pair trading at 0.8584. The pair was worth 0.8608 at Tuesday's close. Next immediate resistance for the pound is seen around the 0.84 level.

Looking ahead, Canada CPI, U.S. housing starts and building permits and import and export prices, all for May, are due out in the New York session.

At 2:00 pm ET, the Fed announces its decision on interest rate. Economists widely expect the federal funds rate to be kept at 0-0.25 percent.