Inflation in the UK was up more than expected in May with consumer prices rising 2.7% from a year earlier. This increase was mainly due to transport costs which increased by 0.4% but RPI inflation also increased to 3.1%, up from 2.9% in April.

In contrast, US inflation rose less than forecast as food prices dropped for the first time in nearly four years. The consumer price index was up 0.1% in May after falling 0.4% in April. Slower global growth and restrained wage growth in the US have made it difficult for companies to raise prices. Meanwhile, US housing starts climbed 6.8% to an annualised rate of 914k in May from a revised 856k in the previous month and building permits for new single-family homes rose to a five-year high suggesting the US housing recovery is moving ahead.

German investor confidence rose in June adding to signs of a recovery in Europe’s largest economy. The ZEW index of investor expectations, which aims to predict economic developments six months ahead  was up and a second consecutive rise suggesting healthier economic activity ahead.

There was a noticeable lack of volume across most markets yesterday ahead of today’s key Fed rate announcement. The euro gained some ground with EUR/USD reaching a high of $1.3415 before easing back while GBP/EUR fell  and is currently trading around the 1.1650 mark.