Sterling rose and British government bonds fell on Tuesday after data showed British inflation jumped unexpectedly in June to its fastest rate since January. Consumer prices rose 1.9 percent on the year in June, the Office for National Statistics said. Economists taking part in a Reuters poll had expected inflation to accelerate to 1.6 percent from 1.5 percent in May, a 4-1/2 year low. Sterling surged to the day's high of $1.7147 after the data from $1.7078 beforehand, up a third of a percent and close to a near six-year high of $1.7180 hit earlier this month. The euro fell to a one-week low of 79.27 pence from 79.755 beforehand, down half a percent on the day. Inflation had largely been declining over the past year, and remains below the Bank of England's 2 percent target, allowing the central bank to hold off on raising interest rates despite Britain's surprisingly strong economic recovery. British two-year gilt yields rose 4 basis points to above 0.87 percent and September gilt futures dropped more than 30 ticks to turn negative on the day, and were last 16 ticks lower at 110.49. Britain's benchmark FTSE 100 index pared gains. The index was up by 0.2 percent before the data was published then edged back. It was last down 0.2 percent at 6,735.13.02 points. Separate data released on Tuesday showed house prices also picked up speed, with property prices in London jumping by a record 20.1 percent over the 12 months to May.
