Dollar index hits lowest since Nov

Dollar index hits lowest since Nov”

US retail sales in May recorded their biggest drop in 16 months and consumer prices unexpectedly fell month over month, suggesting inflation pressures are moderating, which could impact further Federal Reserve interest rate increases this year.

The pound has fallen some 11% against the US dollar between May 2016 and last month as investors reacted to Britain's vote to leave the European Union last June and trimmed bets on further rate increases from the BoE as the economy slowed as a result.

The Office for National Statistics said Consumer Prices Index inflation reached 2.9% last month, up from 2.7% in April and the highest level since June 2013. A number of major banks and asset managers have raised the prospect of the Bank of England buying more debt to provide more stimulus for the economy if it slows sharply in what promises to be a politically turbulent year.

The ONS's new preferred measure of inflation CPIH - which includes a measure of owner occupiers' housing costs - rose to 2.7% last month, up from 2.6% in April.

Inflation rose to 2.9 percent in May from 2.7 percent in April. "The wages we are earning is not almost keeping up with the price of goods and services we consume, tightening the squeeze on United Kingdom household finances".

Despite the sharp rise in prices, the Bank of England is widely expected to keep interest rates at their record low of 0.25 per cent when it announces its latest monetary policy decision on Thursday.

The year-on-year gain in the CPI was still larger than the 1.6 percent average annual increase over the past 10 years.

Increased food and electricity prices - following hikes by major energy suppliers - also made a contribution - as did children's clothing. By 1010 GMT, sterling was down 0.1 percent on the day at $1.2738, having traded as strong as $1.2797 earlier.

She added that United Kingdom households "are likely to face a challenging time" as further inflation rises put a tighter squeeze on incomes.

Excluding the food and fuel categories, which can see big swings from month to month, "core" CPI rose 0.1 percent, the third month in a row this closely-watched data point has come in below expectations.

The euro rose to its highest in seven months against the greenback to hit $1.1295, after the dollar broadly weakened on the release of the soft U.S. data. The central bank hinted of a rate cut if the retail inflation sustains at a lower level.

The Consumer Price Index, which tracks changes in the cost of household goods and services, declined 0.1 per cent compared to April.

Headline unemployment was 4.6% in the month, unmoved, and in line with the forecasts of economists.

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