British pound traded steadily against the US dollar on Tuesday, following the consumer price inflation report out of the United Kingdom and amid hopes that the fiscal standoff in the United States will be resolved soon, as the time for action was short.
GBP/USD briefly touched a session high at 1.6007 at 8:30 GMT, after which consolidation followed at 1.5993, rising 0.07% for the day. Support was likely to be received at October 10th low, 1.5912, while resistance was to be met at September 25th high, 1.6087.
A report by the Office for National Statistics (ONS) showed that annual consumer price inflation in the United Kingdom remained unchanged at 2.7% in September, exceeding forecasts that it will slow down to 2.6%. The rate of inflation was still above the 2% target, pursued by the Bank of England, which is considered as providing price stability. The bank would not address the nations Minister of Finance, as inflation did not deviate by more than 1 percentage point from the target level. On a monthly basis, the consumer price index also remained unchanged at 0.4% in September, again above expectations of a 0.3% rate.
Core consumer price index stood at 0.4% during September on a monthly basis, where it was also a month ago.
The index of retail prices in the United Kingdom demonstrated a slight slow down in September to 0.4%, in line with preliminary estimates, from 0.5% in August. On annual basis the indicator also met projections, rising 3.2% in September, after reaching 3.3% during the preceding month.
Meanwhile, market sentiment strengthened, after Senate Majority Leader Harry Reid said on Monday that a “tremendous progress” had been made through negotiations over the US fiscal matter. The approached agreement would suspend the US debt ceiling through February 7th 2014, provide government funding through January 15th and also require a House-Senate budget conference by December 13th, according to an anonymous Senate source familiar with the debates. However, there appeared to be two potential obstacles to an agreement. First, a single senator would be able to use procedural tactics in order to push a final vote past the October 17th lapse in nation’s borrowing authority. Texas Republican Senator Ted Cruz would not rule out stalling maneuvers, as he wanted to see the details of the plan. And secondly, House Republicans, who have demanded major changes to US President Barack Obama’s health-care law, could resist any proposal, which may not meet most of their priorities.
Any deal on the budget matter still would have to be approved by the House of Representatives, while Speaker John Boehner would have to make a decision whether to allow a vote or demand cuts in federal spending.
Elsewhere, the pound was higher against the euro, as EUR/GBP cross decreased 0.12% on a daily basis to trade at 0.8476 at 9:31 GMT. GBP/JPY pair was losing 0.18% to trade at 157.30 at 9:33 GMT.