Pound Falls On Slowing U.K. Consumer Inflation

The pound dropped against its major counterparts in early European deals on Tuesday, following a data showing a slowdown in UK inflation in December led primarily by air fares.

Data from the Office for National Statistics showed that inflation eased to 3 percent in December from 3.1 percent in November. The rate came in line with expectations.

The 3.1 percent logged in November was the fastest since early 2012. The central bank targets 2 percent inflation.

Month-on-month, consumer prices advanced 0.4 percent, as expected, in December.

Core inflation that excludes energy, food, alcoholic beverages and tobacco, slowed to 2.5 percent in December from 2.7 percent in November. Inflation was forecast to slow to 2.6 percent.

Another report from ONS showed that output price inflation accelerated to 3.3 percent in December from 3.1 percent in November.

Month-on-month, output prices climbed 0.4 percent, the same rate as seen in November.

Input price inflation eased sharply to 4.9 percent in December from 7.3 percent in November.

On a monthly basis, consumer prices edged up 0.1 percent, much slower than November's 1.6 percent increase.

The currency was trading mixed in the Asian session. While it rose against the franc and the yen, it dropped against the euro and the greenback.

The pound dropped to 1.3761 against the greenback, from a high of 1.3806 hit at 9:30 pm ET. If the pound falls further, 1.35 is likely seen as its next support level.

Having advanced to a weekly high of 153.10 against the yen at 9:15 pm ET, the pound reversed direction with the pair trading at 152.45. The pound is seen finding support around the 151.00 mark.

The pound pared gains to 1.3277 against the Swiss franc, from a high of 1.3304 hit at 2:00 am ET. The next likely support for the pound is seen around the 1.29 region.

The pound held steady at 0.8890 against the euro, following a 4-day high of 0.8864 hit at 2:00 am ET.

Data from the Bank of Japan showed that Japan's producer prices rose 0.2 percent on month in December.

That missed forecasts for an increase of 0.4 percent following the upwardly revised 0.5 percent gain in November.

Looking ahead, at 8:30 am ET, the New York Fed's empire manufacturing survey for January will be out.

The Swiss National Bank Governing Board Chairman Thomas Jordan delivers a speech titled "How money is created by the central bank and the banking system" at the University of Zurich at 12:00 pm ET.