Pound Declines Against Euro as British Inflation Slows to Zero

The pound fell versus the euro as a report showed Britain’s inflation rate fell back to zero in June, damping bets the Bank of England will move toward raising interest rates.

Sterling fell for a second day against the dollar. Consumer prices stagnated in the 12 months through June after climbing 0.1 percent in the previous period, the Office for National Statistics said Tuesday, in line with the median forecast in a Bloomberg survey of analysts. Prices fell 0.1 percent in the year through April, the first reading below zero in more than half a century.

A lack of inflation may offer ammunition to those BOE officials who favor keeping interest rates at a record-low 0.5 percent for longer. Markets don’t see U.K. rates rising until May 2016 at the earliest, according to forward contracts based on the sterling overnight index average, or Sonia.

The pound slid 0.4 percent to 71.31 pence per euro as of 9:42 a.m. London time, after appreciating 1.2 percent a day earlier, the most since May 11. Sterling fell 0.2 percent to $1.5463, after dropping 0.2 percent on Monday.

Benchmark 10-year gilt yields fell one basis point, or 0.01 percentage point, to 2.11 percent. The 5 percent bond due in March 2025 rose 0.1, or 1 pound per 1,000-pound face amount, to 125.125.

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