Pound Drops After U.K. Inflation Data

The British pound weakened against other major currencies in the early European session on Tuesday, after data showed that the nation's inflation rose less-than-expected in July.

Data from the Office for National Statistics showed that the U.K. consumer prices climbed 2.6 percent annually in July, the same rate as seen in June. The annual growth was forecast to rise slightly to 2.7 percent.

On a monthly basis, consumer prices fell 0.1 percent in July, while they were expected to remain flat.

Another report from ONS showed that output price inflation grew 3.2 percent annually, slightly slower than the 3.3 percent increase in June. Nonetheless, the rate exceeded the expected 3.1 percent.

On month, output prices gained 0.1 percent after staying flat in June.

Input price inflation eased more-than-expected to a 1-year low of 6.5 percent in July from 10 percent in June. Prices were forecast to climb 6.9 percent.

Month-on-month, input prices remained flat in July in contrast to a 0.3 percent fall in June. Economists had forecast a 0.4 percent rise.

In the Asian trading today, the pound held steady against its major rivals.

In the European trading, the pound fell to nearly a 5-week low of 1.2910 against the U.S. dollar, from an early high of 1.2970. The pound may test support near the 1.27 region.

Against the euro, the pound dropped to a 4-day low of 0.9103 from an early 5-day high of 0.9051. The pound is likely to find support near the 0.92 region.

Against the Swiss franc and the yen, the pound edged down to 1.2547 and 142.47 from an early 6-day high of 1.2646 and a 5-day high of 143.19, respectively. If the pound extends its downtrend, it is likely to find support around 1.23 against the franc and 140.00 against the yen.

Looking ahead, U.S. import price index for July, retail sales data for July, business inventories for June, U.S. Empire State manufacturing index for August and U.S. NAHB housing market index for August and Canada existing home sales data for July are slated for release in the New York session.