The pound declined against the US dollar to the weakest level in three weeks, following data that showed US producer price inflation unexpectedly accelerated its annual pace in December.
Having touched a session low at 1.6327 at 13:36 GMT, GBP/USD traded at 1.6337 at 14:15 GMT, losing 0.63% for the day. Support was likely to be received at December 25th low, 1.6313, while resistance was to be encountered at January 14th high, 1.6464.
The greenbacks demand was supported by a number of upbeat reports, released today.
The Bureau of Labor Statistics, part of the US Department of Labor, released a report that showed the nations PPI surged by an annualized 1.2% in December, after the index increased by 0.7% in November. Analysts had expected the PPI will rise to 1.1%. Month-over-month, the PPI increased by 0.4% in December, in line with analysts forecasts and after the index declined by 0.1% in the preceding month.
Data showed that the core PPI also rose by an annualized 1.4%, exceeding previous month 1.3% increase and higher than analysts estimates of 1.3% gain. Month-over-month, the index rose by 0.3% in December, while analysts had expected the index will rise by 0.1%. In November the core PPI rose by 0.1%.
A separate report showed a gauge that tracks the manufacturing activity in the state of New York, increased to 12.1 in January, the strongest level since May 2012, which was more than three times larger-than-projected. According to the median analyst forecast the index should have increased to 3.5, after an upward revision to 2.22 in the previous month.
The reports provided support to greenback’s demand, as it favored the view that the Federal Reserve Bank may continue tapering during the year. Central bank’s policy makers said on December 18th that they will reduce monthly asset purchases to $75 billion from $85 billion, underscoring improving labor market conditions. The bank will probably continue to pare stimulus by $10 billion at each policy meeting before exiting the program in December, according to a Bloomberg News survey of 41 economists, conducted on January 10th. The Federal Open Market Committee is scheduled to meet next on January 28-29.
In addition, Fed President for Philadelphia Charles Plosser and Fed President for Dallas Richard Fisher, voting members of the Federal Open Market Committee this year, yesterday called for continued reduction of the Fed’s bond-buying program. Fisher said that he would strive to eliminate the program entirely “at the earliest practicable date”, while his colleague said he would prefer the stimulus program to be ended before late 2014.
Meanwhile, yesterday, the pound came under selling pressure after a report by the UK Office for National Statistics. Data showed the annual consumer inflation rate, with its corresponding CPI declined to 2 percent in December, short of analysts’ projections of a 2.1% increase in the previous month and down from November’s reading of 2.1% annual rate. On a monthly basis, the inflation accelerated to 0.4% in December, but was short of analysts’ projections of a 0.5% advance.
A separate report revealed the core CPI also declined to an annualized rate of 1.7% in December, after it increased by 1.8% in the previous month. Analysts had expected the core CPI to remain unchanged at 1.8%.
Investors awaited the speech of Mark Carney, governor of Bank of England, which is due later in the day.
Elsewhere, having hit a session high at 1.0992 at 09:20 GMT, USD/CAD traded at 1.0959 at 12:36 GMT, adding 0.10% for the day. Support was likely to be received at January 14th low, 1.0879, while resistance was to be met at September 28th 2009 high, 1.0994.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
