RTTN: Pound Jumps To More Than 6-month High Against Yen
(RTTNews) - Tuesday, the pound that staged a decline against its major rivals after the U.K. inflation data reversed direction around 5:00 am ET as domestic stocks snapped back some of their early losses.
Traders also reacted positively to the Bank of England Governor Mervyn King's inflation letter.
After opening at 6,060, the FTSE 100 was languishing below the flat line in early trade, but moved into positive territory shortly. The index is currently losing 0.05 percent.
Elsewhere in Europe, the German DAX is rising 0.19 percent and the French CAC 40 is advancing 0.42 percent.
Earlier, the pound declined after a report from the Office for National Statistics showed that UK annual inflation rose to 4% in January from 3.7% in December.
Inflation stayed above the central bank's 2% target for the 14th consecutive month. On a monthly basis, consumer prices rose 0.1%.
UK inflation is likely to continue to pick up to somewhere between 4% and 5% over the next few months, Bank of England Governor Mervyn King said in his open letter to the Chancellor today. Inflation is likely to remain above the 2% target for this year, before falling back in 2012, he said.
Meanwhile, a separate report from the Department of Communities and Local Government showed that house prices in U.K. rose 3.8% from the same period a year earlier to 208,150 pounds in December, higher than analyst expectations for a 2.8% increase.
On a seasonally adjusted month-over-month basis, house prices advanced 0.5% in December, after a 0.3% increase in the preceding month.
The pound touched a 4-week high of 0.8387 against the euro around 7:30 am ET, up from a session's lows of 0.8451. The pound now targets a long-term resistance of 0.8280 against the euro and a move above this level could set its strongest mark in more than five months.
The euro eased after a report showed that the German economy in the fourth quarter expanded less-than analysts had predicted. German GDP rose 0.4% sequentially in the fourth quarter, down from 0.5% forecast and 0.7% growth in the third quarter.
The euro buying intensified in the morning after the Eurozone finance ministers have agreed yesterday to set up a permanent sovereign bailout fund, European Stability Mechanism, for the region worth 500 billion euros ($675 billion), effective from 2013.
Additionally, preliminary data from the Eurostat showed that the eurozone gross domestic product climbed 0.3% sequentially in the fourth quarter. That was unchanged from the third quarter and was less than 0.4% growth economists had expected.
