Forexpros – The pound fell to a new session low against the U.S. dollar on Tuesday, after official data showed that consumer prices in the U.K. unexpectedly fell to their lowest level in two-and-a-half years in May.
GBP/USD hit 1.5620 during European morning trade, the pair’s lowest since Friday, the pair subsequently consolidated at 1.5619, shedding 0.33%.
Cable was likely to find near-term support at 1.5636, Monday’s low and resistance at 1.5741, Monday’s high and an almost one-month high.
The U.K. Office for National Statistics said that consumer price inflation fell to 2.8% year-over-year from 3.0% in April, confounding forecasts for an unchanged reading.
The ONS said the unexpected decline in inflation was due to slower price rises for food and fuel.
The decline in inflation fuelled speculation over the possibility of more quantitative easing from the Bank of England, as until now inflation has been easing more slowly than the bank had hoped.
Meanwhile, safe haven demand remained supported as the yield on Spanish 10-year bonds remained above the critical 7% level on Tuesday, amid concerns that a EUR100 billion bailout agreed earlier this month may not be enough to overhaul the country’s ailing banking system.
The 7% threshold is widely considered unsustainable in the long run and is the level at which Greece, Ireland and Portugal were forced to seek international bailouts.
The pound was lower against the euro, with EUR/GBP adding 0.31% to hit 0.8052.
Later in the day, the U.S. was to publish official data on building permits and housing starts. Elsewhere, leaders from the Group of 20 nations were to hold a second day of talks in Los Cabos, Mexico.
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