Sterling rises as the UK's CPI jumps and investors look to the interest rate

Sterling rose on Tuesday, rallying more than 1 percent versus the dollar and the yen after British inflation unexpectedly held steady in July and strong German investor sentiment boosted demand for risky assets. The pound also rose against the euro, which was on track to post its worst one-day performance against sterling in two months, boosted after stocks stabilized following a sharp fall the previous day. Data on Tuesday showed British consumer prices stayed at an annual rate of 1.8 percent in July, confounding expectations for a fall to 1.5 percent.
"CPI has proved to be a bit stickier than we thought it would be," said George Buckley, UK economist at Deutsche Bank. The GBP/USD is currently trading at $1.6460 as of 8:51am, London Time.

The Swiss franc is likely to be little changed over the next three months as the central bank seeks to stem its gains, according to UBS AG. The Swiss National Bank will keep interest rates near zero and continue franc sales to prevent a strengthening of the currency, Handelszeitung cited central bank board member Thomas Jordan as saying in an interview yesterday. “The deflation risks mean it is still too early for a normalization of monetary policy” from Jordan’s perspective, Brian Kim, a currency strategist at UBS in Stamford, Connecticut, wrote in a report yesterday. The “comments echo the themes and undertone from the SNB’s mid-June assessment and so far the SNB continues to sound comparably cautious.” The USD/CHF is currently trading at 1.0770 as of 8:55am, London Time.

The yen held firm near recent highs against other major currencies on Wednesday, erasing earlier losses as investors stayed cautious about more falls in Chinese shares and hesitated to return to risky investments. In early Asian trade the yen fell broadly after robust U.S. corporate results gave support to Wall Street and helped boost growth-linked currencies such as the Australian dollar. But investors cut those yen short positions ahead of the opening of the Shanghai share market, said to be the main driver of current moves in the absence of major economic data. The USD/JPY is currently trading at 94.30 as of 9:19am, London Time.

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