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NEW YORK: The US dollar bounced on Wednesday after inflation in the United Kingdom cooled more than economists expected in June, sending the pound sharply lower against other major currencies.

Britain’s rate of inflation was its slowest in over a year at 7.9%, according to data that will ease some of the pressure on the Bank of England to keep on raising interest rates sharply. Economists polled by Reuters had mostly forecast a smaller slowdown, to 8.2% in the 12 months to June from May’s 8.7%.

“It was the first time in five months that we’ve seen inflation surprise to the downside, the trend had been just the opposite,” said Joe Manimbo, senior market analyst, at Convera in Washington, D.C. “That’s casting some doubt on another jumbo rate hike by the Bank of England next month.”

Before Wednesday’s data, investors had assigned a roughly 60% chance that the BoE would hike rates on Aug. 3 by a half-percentage point. That turned into a 60% chance of a quarter-percentage point hike after the data.

“The dollar is catching a reprieve because it’s the inflation data that’s really dictating sentiment, the dollar was whacked by cooler inflation last week and now it’s the pound’s turn today,” Manimbo added.

Sterling fell 1.02% against the greenback to $1.2901 and got as low as $1.2898, the lowest since July 11. It reached $1.31440 last Thursday, the highest since April 2022.

The euro also gained 0.92% against the British currency to 0.8690.

The dollar index rose 0.27% against a basket of currencies to 100.21. The euro fell 0.13% to $1.1215.

The New Zealand dollar was volatile, briefly spiking after consumer inflation came in slightly above expectations in the second quarter, before falling to last trade down 0.36% at $0.6250.

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