MercoPress. South Atlantic News Agency

Sterling surges but eyes are set on the renminbi

The British currency continued to surge Tuesday following an unexpected rise in March inflation anticipating the possibility of further interest rates hike by the Bank of England.

Consumer price index rose to 1,9% in March, the highest since May 1998 and ahead of the forecasted 1,7% for the whole of 2005.

Current UK basic rate stands at 4,75% and money market agents believe that 5% to curtail inflationary pressures in not far away. This helped push pound sterling to 1,9164 US dollars and £ 0,6798 against the Euro, both a several months high.

But not all analysts anticipate an immediate response from the Bank of England since inflation without energy and transport costs included was actually 1,3%.

Besides since oil prices have began to slip from record highs prospects are that the Consumer Prices Index should begin to recede in the coming month and even beyond.

Meantime in the United States headline producer inflation reached a 0,7 high in March compared to the same month a year ago, but the core index stripped of food and energy costs was 0,1%. However it was insufficient to relieve the battered US dollar that continued to decline against the pound and the Euro with a four week low of 1,3054.

Nevertheless speculation in money markets focused in the Chinese currency, following last weekend's G-7 Finance ministers meeting with mounting pressure, particularly form Washington, for a revaluation or "floating" of the renminbi, currently tied to the US dollar.