Pound Drops On Risk Aversion Amid Trade Worries
The pound declined against its major counterparts in the
European session on Wednesday amid risk aversion, as U.S. President
Donald Trump's speech at the Economic Club of New York didn't give
any information on the trade deal with China.
Investors became nervous after Trump threatened further increase
in tariffs if a trade deal is not reached.
The president said a significant phase one trade deal with China
"could happen soon" but stressed that he would only accept an
agreement that is good for U.S. companies and workers. He didn't
offer clarity on a rollback of import tariffs.
Data from the Office for National Statistics showed that UK
consumer price inflation eased more-than-expected in October.
The consumer price index rose 1.5 percent year-on-year following
a 1.7 percent increase in September. Economists had expected the
inflation rate to drop to 1.6 percent.
Separate data showed that output price inflation slowed to 0.8
percent from 1.2 percent in September. Economists had forecast a
0.9 percent increase in factory-gate prices.
Input prices decreased 5.1 percent year-on-year following a 3
percent slump in the previous month. The decline was largely driven
by a fall in crude oil prices. Economists had expected input prices
to drop 4.6 percent.
House price inflation was 1.3 percent in September, unchanged
The currency showed mixed trading against its major counterparts
in the Asian session. While it was steady against the greenback and
the euro, it fell against the franc. Against the yen, it rose.
The pound dropped to 0.8585 against the euro, from a high of
0.8559 it touched at 5:00 pm ET. The pound is poised to find
support around the 0.88 area.
After an uptick to 1.2862 against the greenback at 5:00 pm ET,
the pound reversed direction, reaching as low as 1.2823. If the
pound slides further, it may target support around the 1.27
The pound declined to a 2-day low of 139.82 against the yen from
yesterday's closing value of 140.01. The pound is seen finding
support around the 136.5 level.
Data from the Bank of Japan showed that Japan's producer prices
fell at a slower rate in October.
The producer price index fell 0.4 percent year-on-year in
October, following a 1.1 percent decline in September. Economists
had expected a 0.3 percent fall.
The pound weakened to 1.2704 against the franc, its lowest since
October 24. The pound may challenge support around the 1.26
Looking ahead, U.S. consumer price inflation and monthly budget
statement for October will be featured in the New York session.
At 11:00 am ET, Federal Reserve Chair Jerome Powell will testify
on the economy before the Joint Economic Committee in Washington
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