Forex - GBP/USD near 2-month lows after drop in U.K. inflation

The pound was trading close to to-month lows against the dollar on Tuesday after data showed that the annual rate of inflation in the U.K. slowed to the lowest level in more than a year in October.

GBP/USD was down 0.60% to 1.5892, the lowest since September 13, during European afternoon trade, after falling as low as 1.5854 earlier.

Cable was likely to find support at 1.5775, the low of September 13 and resistance at 1.5900.

Sterling dropped after the Office for National Statistics said the annual rate of inflation in the U.K. slowed to 2.2% in October, the lowest since September 2012, from 2.7% the previous month. Economists had expected the inflation rate to slow to 2.5%.

Inflation was 0.1% higher from a month earlier in October, below expectations for a 0.3% rise.  

The core inflation rate, which excludes energy, food, alcohol and tobacco, slowed to 1.7% year-over-year, the lowest rate since September 2009, from 2.2% in September.

The retail price index rose 2.6% in October, below forecasts for a 3% increase, after rising 3.2% in September. 

The data also showed that the house prices index climbed 3.8% last month, below expectations for a 4.1% gain.

Demand for the dollar continued to be underpinned after last week’s strong U.S. jobs report spurred speculation that the Federal Reserve may start winding down its USD85 billion-a-month asset purchase program before the end of the year.

Elsewhere, the euro rose to one-week highs against sterling, withEUR/GBP advancing 0.58% to 0.8434.

Data released earlier Tuesday showed that the annual rate of inflation in Germany, the euro zone’s largest economy, slowed to 1.2% in October, the lowest level in more than three years, from 1.4% in September.

The data added to concerns over growing deflationary pressures in the euro area that prompted the European Central Bank to cut rates to a record low 0.25% on Thursday.

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European stocks push lower in cautious trade; Dax down 0.17%

European stocks pushed lower on Tuesday, as investors remained cautious amid ongoing speculation over when the Federal Reserve will begin tapering its asset purchase program. 

During European afternoon trade, the EURO STOXX 50 fell 0.29%, France’s CAC 40 slipped 0.23%, while Germany’s DAX 30 edged down 0.17%. 
Markets were jittery after official data last week showed that the U.S. economy added 204,000 jobs in October, far more than the 125,000 forecast by economists. 

The upbeat data spurred heightened speculation that the Fed may start winding down its USD85 billion-a-month asset purchase program as soon as its next monthly meeting in December. 

Financial stocks turned broadly lower, as French lenders BNP Paribas and Societe Generale slipped 0.24% and 0.20%, while Germany's Deutsche Bank tumbled 1.24%. 

Among peripheral lenders, Spanish banks Banco Santander and BBVA declined 0.61% and 0.94% respectively, while Italy's Unicredit and Intesa Sanpaolo shed 0.14% and 0.75%. 

Unicredit earlier said that net income fell 39% to EUR204 million in the third quarter from a year earlier, exceeding analysts' estimates. 

Elsewhere, Henkel gained 0.81% after the German maker of Loctite glue and Fa deodorant reported third-quarter operating profit of EUR672 million, above the EUR663 million average estimate. 

In London, commodity-heavy FTSE 100 slipped 0.17%, weighed by sharp losses in energy and mining stocks, while data showed that the annual rate of inflation in the U.K. slowed to the lowest level in more than a year in October. 

Precious metals mining company Fresnillo remained one of the worst performers on the index, down 3.57%, and was closely followed by oil and gas giant Tullow Oil, whose shares tumbled 2.97%, while rival Anglo American lost 1.87%. 

Meanwhile, RSA Insurance recovered from Monday's over 9% drop and surged 5.31%. Late Sunday, the company said it appointed PwC to undertake a review of the issues identified last week in its Irish claims and finance functions. 

In the financial sector, stocks remained broadly lower as Lloyds Banking dropped 0.71% and HSBC Holdings declined 0.60%, while Barclays and the Royal Bank of Scotland plummeted 1.12% and 1.37% respectively. 

In the U.S., equity markets pointed to a lower open. The Dow Jones Industrial Average futures pointed to a 0.11% loss, S&P 500 futures signaled a 0.20% fall, while the Nasdaq 100 futures indicated a 0.23% decline.

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U.S. futures lower as Fed tapering still in focus; Dow Jones down 0.12%

U.S. stock futures pointed to a lower open on Tuesday, as investors remained cautious amid growing expectations for the Federal Reserve to begin tapering its stimulus program before the year end. 

Ahead of the open, the Dow Jones Industrial Average futures pointed to a 0.12% loss, S&P 500 futures signaled a 0.22% decline, while the Nasdaq 100 futures indicated a 0.20% fall. 

Markets were jittery after official data last week showed that the U.S. economy added 204,000 jobs in October, far more than the 125,000 forecast by economists. 

The upbeat data spurred heightened speculation that the Fed may start winding down its USD85 billion-a-month asset purchase program as soon as its next monthly meeting in December. 

Richard Fisher, President of the Federal Reserve Bank of Dallas, said on Tuesday that the Fed's stimulus program could not continue forever. 

In earnings news, late Monday News Corp. reported a 2.8% decline in first-quarter revenue, hurt by lower demand for print advertising, sending shares down 1.55% in after-hour trade. 

In the tech sector, Apple shares edged down 0.08% in late trading as the company was preparing to face a trial over claims by a California inventor that a patent he holds covers key features of the iPhone. 

Separately, the tech giant was set for the retrial of a court fight against Samsung Electronics in which the iPhone maker could reportedly seek to obtain over USD411 million in damages a judge cut from a USD1.05 billion jury award in 2012 over patents. 

The telecom sector was also expected to be active, after T-Mobile US said it plans to sell shares valued at almost USD1.8 billion, raising money it could use to acquire wireless airwaves. 

Other companies likely to be in focus included MBIA, Potbelly and Babcock and Wilcox, scheduled to report quarterly results later in the day. 

Across the Atlantic, European stock markets were lower. The EURO STOXX 50 declined 0.42%, France’s CAC 40 slid 0.33%, Germany's DAX fell 0.27%, while Britain's FTSE 100 shed 0.28%.

During the Asian trading session, Hong Kong's Hang Seng Index dropped 0.73%, while Japan’s Nikkei 225 Index surged 2.23%.

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Dollar higher vs. yen, pound drops after U.K. inflation report

The dollar rose to two-month highs against the yen on Tuesday as last week’s stronger than expected U.S. jobs report continued to lend support, while the pound fell sharply after data showed that the annual rate of inflation in the U.K. slowed to the lowest level in more than a year in October.

During European morning trade, USD/JPY rose 0.61% to 99.75, re-approaching the 100 level last hit on September 11.

The dollar remained broadly stronger after last week’s strong U.S. jobs report spurred speculation that the Federal Reserve may start winding down its USD85 billion-a-month asset purchase program before the end of the year.

Sterling fell to two-month lows against the dollar, with GBP/USD down 0.75% to 1.5868 from Monday’s close of 1.5964.

The drop in the pound came after official data showed that the annual rate of inflation in the U.K. slowed to 2.2% in October, the lowest since September 2012, from 2.7% the previous month. Economists had expected the inflation rate to slow to 2.5%.

The drop in inflation was mainly due to lower prices for motor fuel, airfares, second-hand cars and university tuition.

Inflation was 0.1% higher from a month earlier in October, below expectations for a 0.3% rise.  

The core inflation rate, which excludes energy, food, alcohol and tobacco, slowed to 1.7% year-over-year, the lowest rate since September 2009, from 2.2% in September.

The euro slid against the dollar, with EUR/USD down 0.14% to 1.3386, still holding above the seven week low of 1.3294 hit on Thursday.

Data released on Tuesday showed that the annual rate of inflation in Germany, the euro zone’s largest economy, slowed to 1.2% in October, the lowest level in more than three years, from 1.4% in September.

The data added to concerns over weakening demand in the euro area, after the European Central Bank surprised investors with a rate cut last Thursday.

Elsewhere, the dollar was slightly higher against the Swiss franc, withUSD/CHF rising 0.13% to 0.9320.

The greenback was also higher against the Australian dollar, withAUD/USD falling 0.42% to 0.9320.

Australia’s dollar came under pressure after the National Australia Bank said its index of business confidence pulled back from three-and-a-half year highs in October amid concerns over the tepid outlook for domestic demand.

The greenback pushed higher against the New Zealand and Canadian dollars, with NZD/USD losing 0.42% to trade at 0.8218 and USD/CADclimbing 0.14% to 1.0489.

The U.S. dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.35% to 81.44. 

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Bond yields fall to lowest on record as Italy sells 12-month debt

Italy saw borrowing costs fall to the lowest level on record at an auction of 12-month government bonds on Tuesday, amid easing concerns over the health of the euro zone’s third-largest economy.

Italy’s Treasury sold the full-targeted amount of EUR6.5 billion worth of 12-month government bonds at an average yield of 0.688, a record-low and down from 0.999% at a similar auction last month.

The yield on Italian 10-year bonds stood at 4.156% following the auction.

The euro was lower against the U.S. dollar following the auction, withEUR/USD easing down 0.15% to trade at 1.3386.

Meanwhile, European stock markets held on to losses. Italy FTSE MIB Index fell 0.35%, the EURO STOXX 50 dipped 0.4%, France’s CAC 40 shed 0.25%, Germany’s DAX slumped 0.25%, while London’s FTSE 100 eased down 0.2%.

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Forex - Pound sharply lower after weak U.K. inflation data

The pound fell to two-month lows against the dollar on Tuesday and was weaker against the euro after data showed that the annual rate of inflation in the U.K. dropped to the lowest level in more than a year in October.

GBP/USD fell 0.79% to 1.5863, the lowest since September 13, during European morning trade, down from Monday’s close of 1.5964.

Cable was likely to find support at 1.5775, the low of September 13 and resistance at 1.5900.

Sterling dropped after the Office for National Statistics said the annual rate of inflation in the U.K. slowed to 2.2% in October, the lowest since September 2012, from 2.7% the previous month. Economists had expected the inflation rate to slow to 2.5%.

The ONS said the drop in inflation was mainly due to lower prices for motor fuel, airfares, second-hand cars and university tuition.

Inflation was 0.1% higher from a month earlier in October, below expectations for a 0.3% rise.  

The core inflation rate, which excludes energy, food, alcohol and tobacco, slowed to 1.7% year-over-year, the lowest rate since September 2009, from 2.2% in September.

The retail price index rose 2.6% in October, below forecasts for a 3% increase, after rising 3.2% in September. 

The data also showed that the house prices index climbed 3.8% last month, below expectations for a 4.1% gain.

Demand for the dollar continued to be underpinned after last week’s strong U.S. jobs report spurred speculation that the Federal Reserve may start winding down its USD85 billion-a-month asset purchase program before the end of the year.

Elsewhere, the euro rose to one-week highs against sterling, withEUR/GBP advancing 0.51% to 0.8427.

Data released earlier Tuesday showed that the annual rate of inflation in Germany, the euro zone’s largest economy, slowed to 1.2% in October, the lowest level in more than three years, from 1.4% in September.

The data added to concerns over weakening demand in the euro area, after the European Central Bank surprised investors with a rate cut last Thursday.

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