LONDON, July 15 Sterling rose and British
government bonds fell on Tuesday after UK inflation jumped
unexpectedly in June to its fastest rate since January, picking
up from a 4-1/2 year low and increasing the likelihood of an
interest rate rise this year.
Consumer prices rose 1.9 percent on the year in June, the
Office for National Statistics said. Economists taking part in a
Reuters poll had expected inflation to accelerate to 1.6 percent
from 1.5 percent in May.
Sterling surged to a high for the day of $1.7141 after the
data from $1.7078 beforehand, up a third of a percent.
The euro fell to 79.36 pence from 79.755 beforehand, down
almost a half of a percent on the day.
UK two-year gilt yields rose 4 basis points to above 0.87
percent and September gilt futures dropped
more than 30 ticks to turn negative on the day, standing 16
ticks lower at 110.46.
Short sterling rate futures <0#FSS:> moved deep into
Ten-year gilts' yield spread over Bunds
widened by 3 basis points to over 143 basis points,
their highest since July 9.
Britain's benchmark FTSE 100 index pared gains. The
index was up by 0.2 percent before the data was published then
edged back to stand 0.1 percent higher at 6,754.02 points.
Separate data showed house prices also picked up speed, with
property prices in London jumping by a record 20.1 percent over
the 12 months to May.
(Reporting By Jemima Kelly, editing by Nigel Stephenson)