LONDON, April 18 (Reuters) - Sterling fell to a four-day low on Wednesday, erasing its gains for the week after British inflation unexpectedly cooled to a one-year low in March, raising doubts over a near consensus view that the Bank of England will raise interest rates next month.
Official data published on Wednesday showed annual consumer price inflation fell to 2.5 percent from 2.7 percent in February.
The British currency slid 0.7 percent to below $1.42 in early London trading, its lowest since last Thursday, and a striking reversal from Tuesday’s session when it climbed to a post-Brexit referendum vote high of $1.4377.
Britain’s internationally-exposed blue chip FTSE 100 extended gains to hit a session high after the UK inflation data, last up 0.7 percent.
British government bond prices surged after the data, pushing two-year yields down 6 basis ponts on the day to a two-week low of 0.830 percent, while 10-year yields dropped by 5 basis points to 1.387 percent. December short sterling interest rate futures rose 4 ticks on the day to a four-week high.
Euro zone bond yields extended their falls after the UK inflation numbers as British gilt yields tumbled. (Reporting by the London Markets Team Editing by Tommy Wilkes)