Investing.com - The pound fell to the day’s lows on Wednesday after data showing that Britain’s inflation fell to its lowest in a year in March, potentially diminishing the chances for a rate hike by the Bank of England next month.

GBP/USD was down 0.59% to 1.4204 by 04:43 AM ET (08:44 AM GMT) from around 1.4275 earlier.

The Office for National Statistics reported that the annual rate of inflation slowed to 2.5% in March from 2.7% in the previous month. That was below expectations for 2.7% and was the lowest level in a year.

Underlying inflation slowed to 2.3% on a year-over-year basis, down from 2.4% in February and missing expectations for an uptick to 2.5%.

With inflation falling back towards the BoE’s 2% target markets took the view that a May rate hike is now less likely.

The inflation figures were the latest indication that a cost of living squeeze in the UK is easing.

Data on Tuesday showed that average earnings rose by 2.8% in the three months to February, outstripping annual inflation for the first time in around a year.

The pound was also lower against the euro, with EUR/GBP climbing 0.65% to 0.8714, up from around 0.8659 earlier.