Investing.com - The pound popped higher against the dollar on Tuesday after data showing that UK inflation remained close to its highest level in six years in January, cementing expectations for a rate hike by the Bank of England in the coming months.
The pound touched a high of 1.3900 immediately following the data, from 1.3883 earlier. The gains eased back and GBP/USD was trading at 1.3882 by 04:58 AM ET (09:58 AM GMT).
The annual rate of inflation was unchanged at 3.0% in January the Office for National Statistics Reported. Economists had expected a reading of 2.9%.
A fall in the price of fuel was offset by prices for cultural goods and services not falling as fast as the previous year, the report said.
The Bank of England took markets by surprise last week after it said interest rates would need to rise sooner and by somewhat more than the BoE had previously expected.
Markets are now pricing in as much as a 70% chance of a quarter-point rate hike by May and a roughly 50% chance of an additional rate hike later this year.
The euro remained a touch lower against sterling, with EUR/GBP dipping 0.11% to 0.8873 from 0.8879 ahead of the inflation reading.
The dollar remained on the back foot after the U.S. government outlined its new $4.4 trillion budget plan 2019 budget on Monday, which showed that the US federal deficit would hit around $1 trillion next year.
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