The British pound extended its losses against the US dollar on Tuesday, after a report showed the consumer prices in UK fell unexpectedly in March, dampening expectations over the interest rate hike by the Bank of England (BoE) in the near term.
GBP/USD fell to a five day low of 1.6228 during European trading, before consolidating at 1.6264. Cable rose to a 15-month high of 1.6427 against the dollar on last Friday. The sterling is likely to find support at a low of 1.6090 hit on April 5.
The Office for National Statistics said UK annual consumer price index (CPI) slowed for the first time in eight months in March, rising 4 percent compared with 4.4 percent in February.
The drop in consumer prices in March was mainly led by 1.4 percent fall in food prices, the biggest decline in almost four years. Also, core CPI, which excludes volatile prices of food and energy, increased 3.2 percent against the analysts’ expectations of 3.4 percent in the month.
The Bank of England (BoE) kept the key rates unchanged at a record low of 0.5 percent on last Thursday, citing uneven economic recovery, even though inflation in February was above the central bank’s target of 2 percent for the fifteenth consecutive month.
The pound also traded lower against the euro, with EUR/GBP gaining 0.67 percent to hit 0.8891.
Separately, the statistics office data showed that Britain’s trade deficit narrowed to 6.7 billion pounds ($10.9 billion) against the market expectations of 8.1 billion pounds ($13.2 billion).