On Wednesday the pound sterling pushed higher against the dollar, but upside
was held in check after data showing a sharp slowdown in U.K. inflation
indicated that rates will remain on hold for the rest of this year.
GBP/USD touched highs of 1.5223 overnight, before pulling back to 1.5168.
Data on Tuesday indicated the annual rate of consumer inflation in the U.K. slowed to 0.5% last month from 1.0% in November, while economists had expected a smaller decline to 0.7%. This kept sterling pressured.
The pound gained ground against the euro, with EUR/GBP losing 0.27% to trade at 0.7744. The euro remained under pressure amid heightened expectations that the European Central Bank could launch quantitative easing measures as soon as its next meeting on January 22.
Consumer prices were unchanged from a month earlier, compared to expectations for an uptick of 0.1%.
The report said inflation was flat in December due to falling gas and electricity costs. In addition, transport costs fell by 0.2% from a month earlier, due to falling petrol and diesel prices.
The inflation slowdown underlined expectations that the Bank of England will keep interest rates on hold at record lows for most of this year.
Sentiment on the British currency was also hit as oil prices continued to tumble on Wednesday after falling to almost six year lows in the previous session, after OPEC said it will not cut output despite a global supply glut.
The continuous oil tumble has fuelled worries of exacerbating already low levels of inflation in many major world economies.
The dollar remained broadly stronger on the back of the diverging monetary policy paths of the Federal Reserve and its major peers, particularly in Europe.
The U.S. dollar index was at 92.57, close to the 12-year peaks of 92.76 scaled last week.
