Forex - GBP/USD drops despite U.S. inflation data, eyes Fed meet

The pound slumped against the dollar on Tuesday despite spotty inflation data out of the U.S., as investors remained camped out in the dollar ahead of the Federal Reserve's Wednesday statement on interest rates and monetary policy.

In U.S. trading on Tuesday, GBP/USD was trading at 1.5653, down 0.43%, up from a session low of 1.5566 and off from a high of 1.5723.

The pair was likely to find support at 1.5496, the low from June 10, and resistance at 1.5752, Monday's high.

Uncertainty over the Federal Reserve's plans to scale back stimulus measures has fueled volatility in global markets in recent days.

Despite conflicting U.S. housing and pricing data, many investors remained parked in the dollar to await the Fed to make its announcement on interest rates and monetary policy on Wednesday followed by a press conference with Chairman Ben Bernanke afterwards.

Official data on Tuesday showed that U.S. consumer prices rose in line with expectations in May. 

The Labor Department said the country's consumer price index in May rose 1.4%  on year, in line with forecasts and up from 1.1% in April.

Consumer prices rose 0.1% in May from April, slightly below expectations for a 0.2% increase.

Core inflation, which excludes food and energy costs, rose 0.2% in May from April, also in line with expectations.

The year-on-year core inflation rate came in unchanged at 1.7%

In a separate report, the Commerce Department said the number of building permits issued in the U.S. fell 3.1% in May to 974,000, outpacing expectations for a decline of 2.8% to 975,000 units, which gave the euro room to rise.

U.S. housing starts rose by 6.8% last month to hit 914,000 units, below expectations for an increase of 11.4% to 950,000.

Meanwhile across the Atlantic, the U.K.'s consumer price index rose more than expected in May. 

The Office for National Statistics said consumer inflation rose 2.7% in May, above expectations for a 2.6% increase and up from a seven-month low of 2.4% in April. 

Core CPI rose 2.2% up from 2% in April.

Consumer prices rose 0.2% from a month earlier, compared to expectations for a 0.1% increase, after rising 0.2% in April.

Cable still traded lower due to Federal Reserve uncertainty.

The pound, meanwhile, was down against the euro and up against the yen, with EUR/GBP trading up 0.72% at 0.8565 and GBP/JPY up 0.35% at 149.05.

In the eurozone, the ZEW index of German economic sentiment rose to 38.5 in June from 36.4 in May, beating analysts' calls for the index to rise to 38.1.

The report said the German economy is likely to slowly pick up speed in the second half of this year, which further fueled the euro's gains against both the pound and the dollar.

Investors largely ignored comments by European Central Bank President Mario Draghi, who said the eurozone's monetary authority stood ready to use interest rates and non-standard measures to shore up growth in the currency bloc's economy.