The US Dollar dipped sharply after weaker-than-expected US inflation data while the Pound was underpinned by a boost to risk appetite and gains in equities.

The Pound to Dollar (GBP/USD) exchange rate jumped to 3-month highs at 1.2845 before settling around 1.2830.

US consumer prices were unchanged for May compared with consensus forecasts of a 0.1% increase with the year-on-year rate edging lower to 3.3% compared with expectations of an unchanged rate of 3.4%.

Energy prices declined 2.0% for the month, although there was still a 3.7% annual increase.

Core prices increased 0.2% on the month compared with forecasts of a 0.3% increase with a larger-than-expected decline in the annual rate to 3.4% from 3.6% previously.

New vehicles, apparel and transport services prices all posted a monthly decline which helped curb the increase in core prices.

The data provided a significant element of relief surrounding US inflation trends, especially after a run of generally unfavourable data.

Although the data will not affect the Federal Reserve forecasts released later in the day, it could have an impact on Fed Chair Powell’s press conference.

Treasuries rallied strongly on the data with the 10-year yield dipping to below 4.30% while equities rallied, both factors undermining the dollar.