LONDON: The pound hit three-month highs against the dollar on Tuesday, after last month’s US producer inflation rose less than expected, although there was a degree of caution among sterling investors ahead of the UK government’s budget this week.
The rise in US prices at the farm and factory gate was much milder than forecast in October, adding to the relief among investors after last week’s consumer data that inflation may well have peaked, thereby giving the Federal Reserve scope to slow down its monetary policy tightening.
The data knocked the dollar down by as much as 2.3% against the pound, which touched its highest since Aug. 19. A cooler read of US consumer inflation last week has prompted investors to factor in the possibility of US interest rates rising more slowly, which in turn, reduces the dollar’s appeal to yield-hungry overseas buyers.
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