Forex - GBP/USD drops on diverging U.S., U.K. inflation reports

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Investing.com - Stronger-than-expected inflation numbers and upbeat housing data out of the U.S. coupled with soft consumer price figures out of the U.K. sent the dollar firming over the pound on Tuesday.

In U.S. trading on Tuesday, GBP/USD was trading down 0.64% at 1.6621 up from a session low of 1.6612 and off a high of 1.6729.

Cable was likely to find support at 1.6466, the low from March 24, and resistance at 1.6738, Monday's high.


The pound weakened broadly earlier Tuesday after official data showed that the annual rate of inflation in the U.K. slowed in July, curbing expectations for an interest rate increase.

The annual rate of inflation slowed to a two-month low of 1.6% in July from 1.9% in June. Economists had expected inflation to tick down to 1.8%. U.K. consumer prices contracted 0.3% in July from June, worse than market forecasts for a 0.2% month-on-month contraction.

The dollar, meanwhile, firmed against the pound and most other currencies on upbeat housing and inflation data.

The U.S. Commerce Department reported earlier that the number of building permits issued in July jumped 8.1% to 1.052 million units from June's total of 973,000. Analysts expected building permits to rise by 2.5% to 1.0 million units in July.

The report also showed that U.S. housing starts soared by 15.7% last month to hit 1.093 million units from June's total of 945,000, far past expectations for an increase of 8.6% to 969,000 units.

A separate report showed that the U.S. consumer price index rose 0.1% last month from June and 2.0% on year, both figures meeting estimates.

Core consumer prices, which exclude food and energy costs, inched up by 0.1% last month, missing expectations for a 0.2% gain, though the year-on-year rate came in at 1.9%, which met expectations.

The data fueled market speculation that the Federal Reserve will close its asset-purchasing stimulus program in October and hike interest rates some time in 2015.

Elsewhere, sterling was down against the euro, with EUR/GBP up 0.30% at 0.8013, and down against the yen, with GBP/JPY down 0.37% at 170.94.

On Wednesday, both the Bank of England and the Federal Reserve are due to release the minutes from their latest policy meetings.

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This article appears in: Investing , Forex and Currencies

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