Pound Weakens Following Soft U.K. Inflation Data

The pound dropped against its major rivals in the early European session on Wednesday, after a data showed that the nation's consumer inflation missed expectations in April.

Data from the Office for National Statistics showed that consumer price inflation advanced to 9 percent in April, slightly down from expectations for a gain of 9.1 percent.

Core inflation that excludes energy, food, alcoholic beverages and tobacco, rose to 6.2 percent, in line with economists' expectations.

On a monthly basis, consumer prices gained 2.5 percent in April versus 2.6 percent expected.

Core inflation increased 0.7 percent on month, while economists were expecting a 0.8 percent rise.

The currency was further weighed by comments from Federal Reserve Chair Jerome Powell that the central bank won't hesitate to raise rates beyond neutral levels to bring inflation down.

Powell added that "there could be some pain involved to restoring price stability", but the labor market would remain strong, with low unemployment and higher wages.

Elsewhere, Biden administration is preparing to block Russia from making payments to U.S. bondholders, triggering the possibility of a default.

An exemption for bond payments will expire on May 25 and officials are unlikely to renew it to put pressure on Russian President Vladimir Putin.

The pound fell to 159.88 against the yen and 1.2343 against the franc, down from its prior highs of 161.78 and 1.2420, respectively. The pound is likely to challenge support near 153.00 against the yen and 1.19 against the franc.

The pound touched a 2-day low of 0.8492 against the euro, dropping from a high of 0.8433 recorded at 2 am ET. Further fall in the currency may challenge support around the 0.86 level.

Against the greenback, the pound was trading at 1.2376, following nearly a 2-week high of 1.2501 hit 8 pm ET. If the pound drops further, 1.21 is likely seen as its next support level.

Looking ahead, Eurozone inflation for April will be published in the European session.

Canada inflation data and U.S. building permits and housing starts, all for April, will be featured in the New York session.