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Forex - Pound off lows with U.K. inflation still negative

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Investing.com -

Investing.com - The pound eased off session lows against the dollar on Tuesday after data showing that U.K. annual inflation remained in negative territory in October, as food, alcohol and tobacco prices all pushed down the consumer price index.

GBP/USD was last at 1.5206 from around 1.5173 ahead of the report.

The Office for National Statistics said the annual rate of inflation fell 0.1% last month, in line with forecasts, after a 0.1% fall in September.

It was the first time annual inflation has fallen for two consecutive months since the series was created in 1996.

The consumer price index ticked up 0.1% from a month earlier, matching forecasts after falling 0.1% in September.

However, underlying inflation, which strips out food, energy, alcohol and tobacco costs rose 1.1% last month, above forecasts for a reading of 1.0% and up from 1.0% in September.

The data also showed that the house price index rose 6.1% in September, above forecasts for a gain of 5.4% and following a 5.5% increase in August.

The Bank of England has said it expects inflation to remain close to zero for the rest of this year, reinforcing expectations that interest rates will remain pegged at record lows for some time to come.

Sterling was higher against the euro, with EUR/GBP down 0.2% to 0.7016.

The euro came under renewed selling pressure on Tuesday as investors turned their attention from the Paris attacks back to the diverging monetary policy expectations between the Federal Reserve and other world central banks.

Demand for the dollar continued to be underpinned by expectations that the Fed will hike interest rates as soon as next month.

U.S. inflation data due out later in the day was expected to provide more clarity on prospects for a December rate hike.

In contrast, the European Central Bank is expected to expand its quantitative easing program and possibly cut rates further into negative territory at its December meeting.

The euro also remained under pressure amid concerns that the terrorist attacks in Paris could undermine the already fragile economic recovery in the region.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was last at 99.59, after rising to seven month peaks of 99.74 earlier.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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