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LONDON, Sept 13 Sterling fell below $1.33 and
hit a low for the day against the euro after Britain's annual
consumer price inflation rate for August came in just below
expectations on Tuesday.
The rate was unchanged at 0.6 percent, the Office for
National Statistics said, compared with forecasts for an
increase to 0.7 percent. Core inflation, which strips out
volatile items, was also a tad lower than expected.
Nevertheless, wholesale price data showed inflation
pressures were building up. Producer price figures showed
manufacturers' input costs rose 7.6 percent compared with a year
earlier, the biggest jump since December 2011.
Sterling fell to $1.3279, down 0.4 percent on the
day, from $1.3320 beforehand. The euro rose to a high of 84.585
pence, up 0.3 percent, compared with 84.31 pence
before the inflation data was released.
Last month the Bank of England said sterling's 10 percent
fall against the dollar and the euro after Britons voted to
leave the European Union in June was likely to cause inflation
to overshoot its 2 percent target. But the central bank said
most policymakers were likely to see through this jump and were
likely to keep policy accommodative to support the economy.
"We would expect to see inflation rise above the BoE's
target in the months ahead, but their concern is supporting the
economy rather than short-term influences on inflation from
sterling's fall," said Andy Scott, economist at HiFX.
The pound dipped last week but has broadly done well in the
past month as a handful of economic indicators suggested the
British economy was holding up better than expected after the
The pound had been on a winning streak until last Tuesday,
hitting a seven-week high of $1.3445 that left it more
than 5 percent up from a three-decade low plumbed in July soon
after the referendum.
Analysts said there were signs that the pound's rally was
running out of steam. Wages, jobs and retail sales data are all
due this week and traders said disappointing numbers could see
sterling come under pressure.
The BoE meets on Thursday and is not expected to announce
new measures, having cut interest rates to record lows and
reintroduced an asset-purchase programme last month. Traders
expect it to stick to a dovish bias after Governor Mark Carney
last week kept the option of further easing on the table.
"Sterling may be less sensitive to potential positive
surprises and vulnerable to losses in the event of data
disappointments ahead of the BoE meeting," analysts at Credit
Agricole wrote in a note.
"Indeed, we suspect that the MPC will likely stick to its
very cautious assessment of the economy and fairly dovish policy
outlook despite the latest more upbeat activity data."
(Reporting by Anirban Nag, editing by Mark Trevelyan)