Pound Falls As U.K. Inflation Cools; Markets Focus On U.K. Spring Statement

(RTTNews) - The British pound weakened against other major currencies in the European session on Wednesday, after U.K. consumer price inflation softened unexpectedly in February.

Data from the Office for National Statistics showed that the U.K. consumer price index logged an annual increase of 2.8 percent in February, following January's 3.0 percent rise. Prices were forecast to climb again by 3.0 percent.

Core inflation that excludes prices of energy, food, alcohol and tobacco, was 3.5 percent, down from 3.7 percent in January. The rate was also below economists' forecast of 3.6 percent.

On a monthly basis, consumer prices moved up 0.4 percent, in contrast to the 0.1 percent fall in January. Economists had forecast prices to increase 0.5 percent.

Services cost increased at a steady pace of 5.0 percent in February, ONS reported. At the same time, prices of goods rose at a slower pace of 0.8 percent after a 1.0 percent rise.

Separate data from the ONS today showed that house prices grew 4.9 percent year-on-year in January, following a revised 4.6 percent rise in December.

The economist observed that it should still fall back in the second quarter, though, keeping the Bank of England on track for three further rate cuts this year.

Earlier this month, the BoE maintained its benchmark rate at 4.5 percent amid intensifying uncertainty over global trade policy. The bank projected inflation to peak at about 3.75 percent in the third quarter.

European stocks traded mostly lower ahead of a looming deadline for implementing additional U.S. tariffs. Investors react to Black Sea maritime security deals struck by the U.S. in the war in Ukraine and await more clarity on U.S. President's Donald Trump's trade policy ahead of a new round of tariffs set to take effect next week.

Sentiment was underpinned after the United States announced agreements with Ukraine and Russia to ensure safe passage in the Black Sea and ban military attacks by the two countries on energy facilities.

But many details were unresolved as the Kremlin made the deal conditional on lifting some Western sanctions.

The U.K. Chancellor of the Exchequer will deliver the Spring Statement in the House of Commons later today.

Markets expect Chancellor Rachel Reeves to tighten the fiscal policy by GBP 10 billion. Reeves is likely to reduce spending plans instead of introducing new tax hikes.

The Spring statement will be accompanied by the forecasts for the economy and public finances. The Office for Budget Responsibilities is likely to downgrade its growth projections and lift its inflation outlook.

The British sterling held steady against its major rivals in the Asian trading and started retreating in the pre-European session.

In the European trading today, the pound fell to a 2-day low of 0.8375 against the euro, from an early 3-week high of 0.8333. The pound may test support near the 0.85 region.

Against the yen and the U.S. dollar, the pound dropped to 2-day lows of 193.48 and 1.2887 from early highs of 194.79 and 1.2946, respectively. If the pound extends its downtrend, it is likely to find support around 191.00 against the yen and 1.26 against the greenback.

The pound edged down to 1.1386 against the Swiss franc, from an early 5-day high of 1.1443. On the downside, 1.12 is seen as the next support level for the pound.

Looking ahead, U.S. MBA mortgage approvals data, Canada wholesale sales data for February, U.S. durable goods orders for February and U.S. EIA crude oil data are slated for release in the New York session.