Pound Slides Despite U.K. CPI Rise

(RTTNews) - The British pound weakened against other major currencies in the European session on Wednesday, despite the release of the United Kingdom (UK) Consumer Price Index (CPI) report of August.

Data from the Office for National Statistics showed that the U.K. consumer price inflation rose to a five-month high in August largely due to higher motor fuel prices. Inflation advanced to 3.1 percent from 2.9 percent in July. The rate came in line with expectations.

Meanwhile, core inflation that excludes energy, food, alcohol and tobacco remained unchanged at 2.6 percent in August.

Another report from the statistical office showed increases in input and output price inflation. Input price inflation rose to 6.1 percent from 5.8 percent in the previous month. At the same time, annual growth in output prices climbed to 3.7 percent from 3.3 percent.

On a monthly basis, input prices rebounded 0.3 percent after a 0.8 percent fall and output prices moved up 0.7 percent, following July's 0.4 percent increase.

The Bank of England (BoE) is anticipated to raise interest rates in the near future if inflationary pressures in the UK continue to rise.

On Thursday, the BoE is scheduled to make its monetary policy announcement for September.

At its decision on Thursday, the BoE is "widely expected to keep the policy rate at 3.75% for a sixth straight meeting."

Meanwhile, the investors await the U.S. Federal Reserve's interest-rate decision later in the day, with markets pricing in a 92.4 percent chance of a 25-bps rate hike in response to a recent hot inflation report.

The Fed's potential first hike since July 2023, coming just seven weeks before the midterm elections, could provoke fresh criticism from the White House.

The post-meeting statement, updated economic forecasts and rate projections along with Chair Kevin Warsh's press conference may offer additional clues over whether more hikes could be in store.

In the European trading today, the pound fell to 0.8569 against the euro, 1.3476 against the U.S. dollar and 1.1027 against the Swiss franc, from early highs of 0.8558, 1.3481 and 1.1045, respectively. If the pound extends its downtrend, it is likely to find support around 0.56 against the euro, 1.33 against the greenback and 1.09 against the franc.

Against the yen, the pound edged down to 208.78 from an early 9-day high of 209.48. The pound may test support near the 206.00 region.

Looking ahead, Canada housing starts for August and building permits for June, U.S. MBA mortgage approvals data, U.S. retail sales for August, U.S. export and import prices for August, U.S. New Yor Fed services activity index for September, U.S. business inventories for July, U.S. NAHB housing market index for September and U.S. EIA crude oil data are slated for release in the New York session.

At 2:00 pm ET, the Federal Reserve's (Fed) is set to announce its monetary policy decision.