Sterling rises on stronger than expected UK inflation

Sterling rose 0.4% against the US dollar to $1.564 as UK inflation came in slightly stronger than forecasts at +0.1% year-on-year in July compared to 0% in June. The UK 10-year Gilt yield rose 2 basis points to 1.82% on the news. The price of food and transportation kept a lid on inflation, as expected, but the figure is still stronger than was implied by the Bank of England’s shift to a more dovish stance at their last meeting where inflation forecasts were lowered and rate rises were pushed out to the second quarter of next year.