Forexpros – The pound erased gains against the U.S. dollar on Tuesday, after official data showed that U.K. inflation slowed in April, while comments by the head of the International Monetary Fund also weighed on demand for sterling.
GBP/USD pulled back from 1.5847, the pair’s highest since May 17, to hit 1.5779 during European morning trade, shedding 0.34%.
Cable was likely to find support at 1.5730, Friday’s low and a two-month low and resistance at 1.5847, the session high.
The pound weakened broadly after the official data showed that consumer price inflation in the U.K. eased more-than-expected in April, after accelerating for the first time in six months in March.
The Office for National Statistics said CPI eased to a two-year low of 3% in April, down from 3.5% the previous month, and below expectations for a reading of 3.1%.
The data fuelled speculation that the Bank of England could ease monetary policy further in order to shore up growth, after the last week’s inflation report from the central bank cut growth forecasts and warned of the risk to the U.K. economic recovery stemming from the euro zone crisis.
Meanwhile, Christine Lagarde, managing director of the IMF, speaking after a review of the U.K. economy, said that the government should ease the pace of its austerity program if economic growth remains too slow, while additional fiscal stimulus should also be considered.
The pound was fractionally higher against the euro, with EUR/GBP dipping 0.06% to hit 0.8088.
Also Tuesday, official data showed that public sector net borrowing in the U.K. posted an unexpected surplus of GBP18.8 billion in April, boosted by a Royal Mail asset transfer. Analysts had forecast a public sector deficit of GBP5.8 billion.
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