Euro rose in European trade against the sterling for a second session as 10-year German treasury yields rose on prospects of a 0.5% rate hike by the European Central Bank in March.

Conversely, British 10-year treasury yields after data showed UK consumer prices slowed down for the third straight session, reducing pricing for future UK rate hikes.

EUR/GBP rose 0.15% to 0.8896, with a session-high at 0.8872, after closing up 0.7% yesterday, the first profit in eight days after marking two-week lows at 0.8800.

German Yields

German 10-year treasury yields rose 0.7%, extending gains for the third session and hitting six-week highs at 2.485%, bolstering investments in euro. 

Such developments came as markets expect the ECB to raise interest rates by 50 basis points in March.

UK Yields

UK 10-year treasury yields fell 0.3% today off five-week highs on profit-taking, pressuring the pound.

Recent UK data showed consumer prices slowed down for the third month in a row, reducing pressure on Bank of England and hurting future pricing for UK rate hikes. 

However economists still expect a 0.25% rate hike by the BoE at the next meeting as wages remain strong, but the bank might stop its policy tightening process in May.

Expectations

Experts at CitiBank advise for the purchase of the EUR/GBP pair, targeting levels of 0.92.

Sterling fell against most major rivals after inflation data showed prices slowed down more than expected. 

Official data showed UK consumer prices rose 10.1% last month, down from 10.5% in the previous reading, while analysts expected a 10.3% increase. 

Bank of England is expected to carry on its policy tightening path until inflation is brought back under control.

GBP/USD fell 1.3% to 1.2017 as of 19:00 GMT. 

The Dollar

The dollar index rose 0.7% to 104.02 as of 18:43 GMT, with a session-high at 104.1, and a low at 103.1. 

Earlier data showed US retail sales rose 3% in January, above estimates of 1.9%, and compared to December's 1.1% decline.

Core sales, excluding transportation items, rose 2.3%, above estimates of 0.9%, and after December's 0.9% drop.

Such data sent investors to buy up the dollar as a haven against potential inflationary pressures in the US. 

A stronger dollar puts pressure on many other commodities and metals.

Alongside dollar, US two-year treasury yields surged as well, marking three-month highs today.

The Energy Information Administration reported a huge spike in US crude stocks last week, amounting to 16.3 million barrels to 471.4 million barrels, while analysts only expected a rise of 1.5 million barrels. 

Gasoline stocks rose by 2.3 million barrels to 241.9 million, while distillate stocks fell 1.3 million barrels to 119.2 million barrels. 

US stock indices declined today despite a batch of positive data, however markets continue to assess latest US inflation numbers. 

Increasing Inflation

Latest inflation data showed US consumer prices rose 0.5% m/, , above estimates of a 0.4% increase.

On a yearly basis, prices rose 6.4% in January , above estimates of 6.2%.

Core prices, excluding food and energy, rose 0.4% last month, and 5.6% on a yearly basis. 

Retail Sales

US retail sales rose 3% in January, above estimates of 1.9%, and compared to December's 1.1% decline.

Core sales, excluding transportation items, rose 2.3%, above estimates of 0.9%, and after December's 0.9% drop.

Dow Jones fell 0.6%, or 200 points as of 15:07 GMT to 33,887, while S&P 500 fell 0.6%, or 25 points to 4,111, as NASDAQ gave up 0.6%, or 70 points to 11,890.