FXstreet.com (Barcelona) - European markets are going through moderate losses on early trade with investors' focusing on another set of earning reports by major U.S. companies later today. In Forex markets, the Pound is rallying on rumours of an end on Kraft - Cardbury deal.

Eurostoxx 50 Index drops 0.6%, while the German DAX Index dips 0.55%, and the French CAC Index trades 0.6% below its opening level. In the UK, the FTSE Index drops 0.8%.

On the macroeconomic domain, UK CPI advanced at a 0.6% pace in December, three times as much as the 0.2% increase expected, while year on year, inflation rose at a 2.9% pace, beating experts expectations of a 2.5% increase. Retail Prices Index rose 0.6% on the month and 2.4% year on year, the largest increase since 1.979.

Pound rally extends after CPI

GBP/USD rally from levels below 1.5900 on January 7 has extended to a fresh 6-week high at 1.6455 as the pair jumped about 80 pips immediately after National Statistics released December CPI figures. At the moment, the Pound trades at 1.6410.

EUR/USD recovery from 1.4330 low on Monday has found resistance at 1.4415 on Tuesday, and the pair has dropped about 85 pips to re-test Monday's low at 1.4330.

USD/JPY decline from 93.80 high on Jan 7 extended during Asian session as the pair broke below 90.60 support to hit a fresh 4-week low at 90.30 (32.8% Fib retreacement of the Nov Jan rally), which, so far, remains intact.