Sterling rises vs. euro on inflation figure

Sterling strengthened against the euro by 0.35 cents (0.30%) yesterday to close the day at 1.1858.

• In early trading yesterday sterling rose against the single currency, after data released in the UK showed inflation fell less than forecast in May. Yesterday’s UK CPI reading of 2.2% was slightly down on the 2.3% registered in April, but still comfortably above the Bank of England’s target of 2% inflation. Deflation now looks increasingly unlikely.
  
• However, sterling’s gains were capped to some extent following the release of better-than-expected German ZEW Economic Sentiment survey. This month’s reading of 44.8 was well ahead of the 35.0 predicted, bolstering investor hopes of eurozone recovery.
  
• In trading so far today the pound has pared some of the gains it made yesterday, as investors look ahead to important UK employment data out later today.
  
• There are no major announcements due in the eurozone today, whilst in the UK Claimant Count Change data and MPC Minutes are out at 09.30 BST.