Bank of England signals it may hike interest rates this year LONDON (MarketWatch) — The U.S. dollar struggled to find direction on Wednesday, while the British pound soared in reaction to a signal the Bank of England may hike interest rates later this year. The dollar index DXY +0.11% , which measures the greenback against a basket of six currencies, traded at 74.598, up marginally from 74.569 in late North American trading on Tuesday. The British pound was the big gainer in European action, outpacing other G-10 currencies after the Bank of England‘s quarterly inflation report signaled interest rates were likely to rise by year-end. Read more about the Bank of England's inflation outlook. The British pound GBPUSD +0.7027% traded at $1.6476 after reaching as high as $1.6516, compared to $1.6363 the previous day. “The report outlined a higher near-term inflation profile with upside risk from energy prices, while growth is likely to suffer from weaker consumption and a less pronounced boost from net trade,” said Christian Lawrence, a strategist at Royal Bank of Canada. “Even so, the BOE [Bank of England] conceded that underlying economic activity might be a bit firmer than the official statistics would suggest. We maintain our view that the bank is most likely to begin raising rates in November,” he said. The euro EURUSD -0.4166% traded at $1.4344, compared to $1.4405 in late North American trading on Tuesday. The euro fell sharply late last week on renewed fears over Greece’s debt crisis. Some strategists contend the euro has largely stabilized, factoring in worries over the nation’s solvency problems. “I believe we’ll continue to climb the wall of worry in euro/U.S. dollar as the dollar dead-cat bounce fizzles and we resume the path of reserve manager diversification out of [the dollar] in size and into” the euro, Australian dollar, Swiss franc, Canadian dollar and Japanese yen, said Brad Bechtel, managing director at Faros Trading LLC in Stamford, Conn. Inflation data from China on Wednesday showed a 5.3% jump in consumer prices in April compared to a year ago. That was slightly below the 5.4% reading for March, which was a 32-month high for the data, but above economist forecasts for a rise of between 5.1% and 5.2%. On the other hand, wholesale inflation climbed 6.8%, missing economist forecasts, while industrial output growth of 13.4% also undershot expectations. Read more on Chinese data. The dollar bought 81.12 Japanese yen USDYEN +0.3587% , from ¥80.81 in late trading on Tuesday.

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