Investing.com - The pound trimmed losses against the U.S. dollar on Tuesday, as the release of mixed U.S. economic reports dampened demand for the greenback, although earlier U.K. inflation data continued to weigh on sterling.
GBP/USD pulled away from 1.6938, the pair's lowest since June 12, to hit 1.6966 during U.S. morning trade, still down 0.11%.
Cable was likely to find support at 1.6866, the low of May 6 and resistance at 1.6990.
The Labor Department reported that U.S. consumer prices rose at an annual rate of 2.1% last month, while prices were up 0.4% from a month earlier. Market expectations had been for an annual increase of 2.0% and a monthly rise of 0.2%.
Rising inflation levels would give the Federal Reserve less leeway to keep interest rates on hold at record lows as the economic recovery continues to gain momentum.
At the same time, the U.S. Commerce Department said that the number of building permits issued last month fell by 6.4% to a seasonally adjusted 991,000 units from April’s total of 1.059 million. Analysts expected building permits to decline by 0.1% to 1.05 million units in May.
The report also showed that U.S. housing starts dropped by 6.5% last month to hit a seasonally adjusted 1.001 million units from April’s total of 1.071 million, disappointing expectations for a decline of 3.7% to 1.034 million units.
The pound dropped to session lows against the dollar earlier, after the Office for National Statistics said the annual rate of inflation came in at 1.5% last month, down from 1.8% in April and the lowest reading since October 2009.
Economists had expected the annual inflation rate to slow to 1.7%.
Core CPI, which strips out food costs, but includes transportation costs, rose 1.6% year-over-year, slightly below expectations of 1.7%.
However, the report also showed that house prices rose 9.9% in April, their biggest annual increase since June 2010, fuelling fears over a bubble in the property market.
Despite the rapid economic recovery in the U.K. low levels of inflation have given the Bank of England leeway to keep interest rates on hold at record lows of 0.5%. But BoE Governor Mark Carney indicated last week that rates could rise sooner than markets expect as the recovery continues to gain momentum.
Sterling was fractionally higher against the euro, with EUR/GBP easing 0.09% to 0.7985.
Also Tuesday, the ZEW Institute said the German economic sentiment index fell to an 18-month low of 29.8 this month, from a reading of 33.1 in May, compared to expectations for a rise to 35.0.