News Column

Pound Falls As UK Inflation Slows To 4-1/2-year Low

June 17, 2014

BRUSSELS (Alliance News) - The British currency weakened against the other major currencies in the European session on Tuesday as the UK inflation eased in May to the lowest since October 2009, due to a fall in transport and food costs.

The Office for National Statistics showed that inflation fell to 1.5% in May from 1.8% in April, when it was expected to drop marginally to 1.7%. The 1.5% was the weakest since October 2009.

Month-on-month, the consumer price index fell unexpectedly by 0.1%, reversing the 0.4% increase posted in April. Economists had forecast a 0.2% rise for May.

Consumer price inflation excluding cost of energy, food, alcoholic beverages and tobacco, eased to 1.6% in May from 2% in April.

Meanwhile, input prices continued its downward trend in May. Input prices slid by less than expected 5% after falling 5.3% in April. Economists had forecast a 4.3% fall.On a monthly basis, input prices dropped again by 0.9%, larger than the forecast for 0.1% drop.

The pound fell to a 5-day low of 0.8007 against the euro from an early high of 0.7982. The next possible downside target level of the pound is seen at 0.81.

Moving away from early highs of 1.6985 against the US dollar and 1.5262 against the Swiss franc, the pound slipped to 4-day lows of 1.6936 and 1.5212, respectively. if the pound extends its downtrend, it is likely to find support around 1.67. against the greenback and 1.50. against the franc.

Against the yen, the pound dropped to 172.80 from an early high of 173.27. The pound is likely to find support around the 170.81 area.

Looking ahead, US consumer price index, building permits and housing starts data- all for May are due to be released in the New York session.

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Source: Alliance News

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