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Pound Drops As U.K. Inflation Misses Expectations

The pound declined against its key counterparts in early European deals on Wednesday, as U.K. consumer inflation accelerated less than forecast in March, remaining below the Bank of England's target of 2 percent.

Preliminary data from the Office for National Statistics showed that the consumer price index rose 1.9 percent year-on-year, same as in February. Economists had expected inflation of 2 percent.

The core inflation rate was also unchanged in March, at 1.8 percent. Economists were looking for 1.9 percent price growth.

On a month-on-month basis, the CPI rose 0.2 percent in March, in line with economists' expectations.

The ONS also reported that input price inflation slowed to 3.7 percent in March from a revised 4 percent in February. Economists had forecast inflation of 4.1 percent.

Output price inflation was 2.4 percent, unchanged from February. Economists were looking for 2.2 percent growth.

Meanwhile, house price inflation eased sharply to 0.6 percent in February, which was the lowest rate since September 2012. This was mainly due to a continued slowdown in London, the South East and the East of England, the ONS said.

The pound showed mixed trading against its major counterparts in the Asian session. While it dropped against the euro and the greenback, it rose against the yen and the franc.

The pound hovered at an 8-day low of 1.3032 against the greenback, from a high of 1.3067 hit at 1:45 am ET. The pound is likely to find support around the 1.28 level.

The pound slipped to a 5-day low of 145.92 against the yen, after having advanced to 146.31 at 1:45 am ET. The next possible support for the pound is seen around the 144.00 level.

Data from the Ministry of Finance showed that Japan recorded a merchandise trade surplus of 528.5 billion yen in March.

That exceeded expectations for a surplus of 363.2 billion yen and was up from 334.9 billion yen in February.

Following a high of 1.3164 seen at 4:15 am ET, the pound reversed direction against the franc with the pair trading at 1.3127. The pound is poised to find support around the 1.29 level.

The U.K. currency depreciated to 0.8681 against the euro, its lowest since March 22. Next key support for the pound is seen around the 0.88 level.

Data from Eurostat showed that Eurozone headline inflation slowed in March and core price growth eased to its lowest level in a year, as initially estimated.

Headline inflation slowed to 1.4 percent from 1.5 percent in February. In January, price growth was 1.4 percent.

Looking ahead, U.S. and Canadian trade data for February, Canada CPI for March, U.S. wholesale inventories for February and Federal Reserve's Beige book report are scheduled for release in the New York session.

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