CURRENCIES: Pound Slides Below $1.29 As U.K. Inflation Unexpectedly Stalls

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

Dollar rises for 2nd day as North Korea tensions continue to recede

Continue Reading Below

The pound tumbled on Tuesday after U.K. inflation came in softer than expected and quelled speculation the Bank of England would soon raise interest rates.

Sterling bought $1.2874, down from as high as $1.2971 earlier in the day and $1.2964 late Monday in New York. Against the euro, the pound slumped to EUR1.0956 from EUR1.1004 on Monday.

The downbeat mood came after the Office for National Statistics said British inflation remained unchanged at 2.6% in July (http://www.marketwatch.com/story/uk-consumer-inflation-remains-at-26-in-july-2017-08-15). Analysts had expected a 2.7% reading. Consumer prices in the U.K. have moved rapidly higher since the Brexit referendum in June last year, as the drop in sterling has made imported products more expensive.

Inflation rose to a four-year high of 2.9% in May, but has since cooled a little.

July's data are a "decent way away from the 2.9% reading seen in May. And given that the Bank of England didn't pull the rate hike trigger at that level, they're not going to do it for anything lower, helping to explain why the pound found itself in such a bad mood once the figure was released," said Connor Campbell, financial analyst at Spreadex, in a note.

Continue Reading Below

Later in the day, focus will shift from the pound to the dollar when U.S. retail sales data are released at 8:30 a.m. Eastern Time. Economists polled by MarketWatch expect sales to have increased 0.4% in July compared with a drop of 0.2% in June.

See:MarketWatch's economic calendar (http://www.marketwatch.com/economy-politics/calendars/economic)

"Any rebound of such magnitude will be seen as a relief and could carry USDJPY through the 111.00 level, but if the data misses the mark again -- or worse prints negative the pair could once again tumble towards 109.00 as the day proceeds," said Boris Schlossberg, managing director of FX strategy, at BK Asset Management, in a note.

The dollar bought Yen110.40 ahead of the data, up from Yen109.63 on Monday.

The ICE Dollar Index , which measures the greenback against a basket of six currencies, rose 0.3% to 93.725.

The buck also rose on Monday as fears of a nuclear war between the U.S. and North Korea receded. Tensions eased further on Tuesday after North Korean leader Kim Jong Un decided not to launch a threatened missile attack on U.S. territory Guam (http://www.marketwatch.com/story/north-korea-steps-back-from-plan-to-launch-missiles-at-guam-2017-08-14), according to state media.

(END) Dow Jones Newswires

August 15, 2017 07:26 ET (11:26 GMT)