GBP/USD tumbled on UK consumer price index report

British pound slid against the US dollar on Tuesday, following the official consumer price index report from the United Kingdom, which showed consumer inflation rose less than expected during June.

GBP/USD cross fell to a session low at 1.5044 at 8:45 GMT, after which consolidation followed at 1.5054. Support was expected at July 11th low, 1.4996, while resistance was to be encountered at current session high, 1.5145.

On Tuesday the Office for National Statistics reported that consumer price inflation in the United Kingdom rose by 2.9% in June on annual basis, slightly below projections of a 3.0% increase, and accelerating in comparison with May, when the index advanced by 2.7%. In June this year consumer inflation registered its highest level since April 2012. Annual inflation, driven by higher consumer expenditures for clothing, fuel and footwear, exceeded the targeted level of 2% by Bank of England in mid-term. Official data suggested that consumer prices index could continue to rise in the coming months, supported also by the rising producer prices, as producers expenditures increased at the fastest pace since March 2012. Input Producer Price Index rose by 4.2% in June on annual basis, matching preliminary estimates, and climbing in comparison with the preceding month, when revised data pointed a 1.8% rise. Monthly performance of this indicator showed an increase by 0.2% in June, which opposed expectations of a 0.2% drop, while during May input producer prices fell by 0.6%, a revision down from 0.3% drop previously.

In addition, annual Core Consumer Price Index in UK, that excludes food, energy, alcohol, and tobacco expenses, advanced 2.3% in June in line with projections and up from 2.2% during May. Retail Prices Index (RPI) rose by 3.3% in June annually, slightly below estimates of a 3.4% increase.

All in all, higher inflation reports came out as an addition to other recent economic indicators, which confirmed that UK economy has begun to recover since this January. If this scenario continues in future, it will be unlikely that Bank of England policymakers may consider introducing additional stimulus measures.

Meanwhile, pound slipped to session lows versus the euro, with EUR/GBP cross up by 0.36% to 0.8679.

Later in the trading day, the United States was to release reports on the performance of the consumer price index and industrial production.