The British pound strengthened against other major currencies in the European session on Wednesday, after U.K. consumer price inflation picked up unexpectedly in December on alcohol and tobacco prices.

Data from the Office for National Statistics showed that the consumer price index rose 4.0 percent on a yearly basis, slightly faster than November's 3.9 percent increase. The rate was forecast to ease to 3.8 percent.

The inflation rate increased for the first time since February 2023. Nonetheless, the ONS said the annual rate in December 2023 was the second lowest since September 2021.

Month-on-month, the CPI gained 0.4 percent, offsetting the 0.2 percent decrease a month ago. Prices were expected to climb 0.2 percent.

Another data from the ONS showed that output prices rose for the first time in three months in December. Prices gained 0.1 percent annually, reversing a 0.1 percent fall in November. On a monthly basis, output prices slid 0.6 percent after staying flat a month ago.

The annual fall in input prices deepened to 2.8 percent in December from 2.7 percent in November. On a monthly basis, input prices fell 1.2 percent, which was the largest fall since June 2023. This follows a revised 0.4 percent fall in November.

In the Asian trading today, the pound showed mixed trading against its major rivals. While the pound fell against the U.S. dollar, it held steady against the euro, the Swiss franc and the yen.

In the European trading now, the pound rose to more than a 1-month high of 0.8578 against the euro and more than a 1-1/2-month high of 187.33 against the yen, from early highs of 0.8619 and 185.88, respectively. If the pound extends its uptrend, it is likely to find resistance around 0.84 against the euro and 189.00 against the yen.

Against the Swiss franc, the pound climbed to nearly a 1-month high of 1.0934 from an early high of 1.0869. The pound may test resistance near the 1.10 region.

Moving away from an early more than a 1-month low of 1.2597 against the U.S. dollar, the pound edged up to 1.2677. On the upside, 1.28 is seen as the next resistance level for the pound.

Looking ahead, U.S. MBA mortgage approvals data, Canada PPI and raw material prices, both for December, U.S. retail sales data, U.S. export and import prices, and industrial production, all for December, U.S. business inventories for November, U.S. NAHB housing market index for January and U.S. Fed Redbook report are set to be published in the New York session.

At 9:00 am ET, Federal Reserve Vice Chair for Supervision Michael Barr will speak on "Cyber Risk" before the 2nd Annual Massachusetts Institute of Technology/Federal Reserve System Conference on Measuring Cyber Risk in the Financial Services Sector, in Cambridge, Massachusetts, U.S.

At the same time, Federal Reserve Board Governor Michelle Bowman will participate in discussion, "The Path Forward for Bank Capital Reform," before the U.S. Chamber of Commerce Protect Main Street Lending Event, in Washington D.C, U.S.

At 10:15 am ET, ECB President Christine Lagarde speak at 'How to Trust Economics' event at the World Economic Forum held in Davos, Switzerland.

At 3:00 pm ET, Federal Reserve Bank of New York President John Williams will give opening remarks before hybrid event, "An Economy that Works for All: Measurement Matters," at the Federal Reserve Bank of New York.

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