UPDATE 1-Sterling rises as inflation questions BoE rate hike bets

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(Adds Frost on Brexit, comments, updates prices)

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LONDON, Nov 17 (Businesshala) – The pound climbed to a one-week high against the US dollar and a 21-month high against the euro on Wednesday, after data showed Britain’s inflation hit a 10-year high last month. has been reached, which has raised expectations. Increase in rates early next month.

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The Bank of England is expected to become the first major central bank to raise rates as the coronavirus pandemic crisis rocked the global economy, with market pricing expected to be 61% likely at its December 16 meeting.

“The upside surprise in the October inflation data supports our expectation that the BoE will raise the bank rate by 15bps to 0.25% at its next MPC meeting on 16 December,” Bernberg economist Kallum Pickering said in a note to his clients. Surprisingly”, market bets remained largely unchanged for the December hike.

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On Monday, BoE Governor Andrew Bailey said he was “very uneasy” about the inflation outlook, but some investors remain cautious in calling the central bank’s next move, as markets halved earlier this month. was surprised.

Neil Wilson, an analyst at Markets.com, commented, “Unreliability creates uncertainty even when it is obvious”.

While the BoE has an inflation target of 2%, consumer prices rose 4.2% year-on-year in October, faster than the 3.1% increase in September.

Both the BoE and Businesshala surveys of economists had pointed to a 3.9% reading.

Adding to inflation fears, additional data shows British home prices in September were up 11.8% from a year earlier.

The British currency rose to an unseen high against the euro and a November 10 high against the dollar since February 2020 after the data was released, but its gains gradually faded in morning trading.

At 0950 GMT, sterling was trading up 0.02% against the dollar at $1.3430 and was up 0.11% against the euro at 0.8419 pence.

Fears of a trade war with the European Union are also affecting the pound.

British Brexit Minister David Frost said on Wednesday that his government’s priority was to strike a deal for Northern Ireland to improve the post-Brexit trade system and that a deal could be reached by Christmas.

Britain left the European Union last year, but has since stopped implementing some border checks between its province of Northern Ireland and the rest of the United Kingdom, which the bloc says are part of a London departure deal. obliged to do.

Reporting by Julian Ponthus and Saikat Chatterjee; Editing by Andrew Heavens and Angus McSwan

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