The pound trimmed its early losses against its most major rivals in European deals on Tuesday, and advanced, after data showed that U.K. consumer price inflation came in line with forecasts in August.
Data from the Office for National Statistics showed that U.K. inflation returned to zero in August as expected on slower growth in clothing prices.
Consumer prices remained unchanged in August from a year ago, following a 0.1 percent rise in July.
The official inflation target of the Bank of England is 2 percent and the bank has estimated inflation to return to the target level within two years.
On a monthly basis, consumer prices advanced 0.2 percent as expected by economists, offsetting 0.2 percent fall in July.
Another report from ONS showed that factory gate prices fell 1.8 percent in August from a year ago, compared with a fall of 1.6 percent in July. Prices were expected to ease by 1.7 percent.
On a monthly basis, output prices dropped 0.4 percent, bigger than July’s 0.1 percent fall. It was also larger than the expected decrease of 0.2 percent.
Input prices plunged 13.8 percent from last year after falling 12.6 percent in July. Economists forecast a 13.6 percent annual fall.
Month-on-month, the decline in prices deepened to 2.4 percent from 1.2 percent a month ago. The pace of decline matched expectations.
Traders await U.K. labour market statistics due tomorrow for more clues about the economy. ILO unemployment for July is expected to remain unchanged at 5.6 percent in July. Additionally, weekly earnings growth, excluding bonuses, is expected to rise to 2.9 percent in July, from 2.8 percent in the previous month.
European markets are trading in red, as investors became nervous ahead of the Federal Reserve monetary policy announcement, due this week. Although most economists expect the Fed to retain interest rate unchanged, the prospectus of higher borrowing costs in near future weighed on risk sentiment.
The pound was trading lower against its major rivals in the previous session.
In European deals, the pound spiked up to 1.4994 against the Swiss franc, recovering from an early weekly low of 1.4912. The next possible resistance for the pound-franc pair is seen around the 1.51 level. At Monday’s close, the pair was valued at 1.4931.
The pound firmed to a 4-day high of 0.7313 against the euro, after falling to 0.7344 at 2:30 am ET. If the pound continues rise, it may challenge resistance around the 0.72 area. The pair finished yesterday’s trading at 0.7332.
The pound reversed from an early low of 1.5402 against the greenback, edging higher to 1.5457. The pound may possibly test resistance surrounding the 1.56 region. The pound was trading at 1.5423 against the greenback at Monday’s close.
On the flip side, the pound remained lower against the yen. hovering around an early 5-day low of 184.24. The pair finished Monday’s trading at 185.46.
The currency was under pressure, as the yen advanced after the Bank of Japan refrained from expanding its asset purchase program despite signals of faltering economic momentum.
In a statement, the BoJ announced that the policy board headed by Governor Haruhiko Kuroda decided by an 8-1 majority vote to maintain its target of raising the monetary base at an annual pace of about JPY 80 trillion. The decision was widely expected by economists.
Looking ahead, U.S. retail sales and industrial production, both for August, and business inventories for July, as well as Canada existing home sales for August are to be released in the New York session.
The material has been provided by InstaForex Company – www.instaforex.com