Inflation as measured by the Consumer Prices Index rose to 0.5% last month, up from 0.3% in February, driven mainly by a sharp increase in air fares.
Sterling was up 0.5% against the dollar at $1.4307, while against the euro it rose 0.5% to â‚¬1.2543.
On the stock market, by midday the FTSE 100 had wiped out its early losses to stand 6.63 points higher at 6,206.75.
Commodity-related stocks were having another good day, and among the big mining firms Anglo American rose 5.9% and BHP Billiton added 3.2%.
Equipment hire company Ashtead Group was the biggest faller in the FTSE 100. Its shares dropped 3.9% after HSBC cut its rating on the stock to "hold" from "buy".
Whitbread's shares were down 1.9% after it said that the managing director of its Costa Coffee chain, Christopher Rogers, was leaving the company.
Oil prices continued to rise on hopes that a meeting of oil producers this weekend will take action to reduce the global supply glut.
Brent jumped to $43.58 a barrel at one point before dropping back to $43.17. US crude rose 23 cents to $40.59 a barrel.
Sterling rose after the UK's inflation rate increased by more than expected.