FX round-up: Pound takes hit from Brussels bombings, weak CPI

The pound had the dubious honour on Tuesday of registering the largest downside move among the main currency crosses.

A weak inflation print for the month of February undermined sentiment towards sterling, although some analysts were pointing instead to the deadly bombings that took place earlier that same day on the other side of the Channel, in Brussels.

In the opinion of Bank of America-Merrill Lynch, the deadly attacks might stoke anti-refugee anger and feed sentiment in favour of the 'leave' campaign in the upcoming Brexit vote.

Cable surrendered 1.08% to finish the session at 1.4214, with the pound also lower by 0.94% against the yen as of 17:39GMT at 159.59 and by another 0.89% versus the euro at 1.2668.

UK consumer prices advanced at a steady 0.3% year-on-year pace in February, unchanged from the month before but nonetheless came in a tenth of a percentage point below what analysts had been expecting.

Core CPI was unchanged at 1.2%.

Commenting on the data, Samuel Tombs, chief UK economist at Pantheon Macroeconomics told clients that: "Looking ahead, we still think that CPI inflation is likely to return to its target in early 2017—and overshoot it slightly thereafter—as the drag from lower commodity prices unwinds, the lower pound pushes up import prices and the tight labour market ensures that unit wage costs rise at an even faster pace."

Euro/dollar on the other hand was just 0.18% lower at 1.1221, while dollar/yen - a widely followed barometre of risk-apettite - in fact rose 0.25% to end the session at 112.24.

In parallel, the Aussie advanced 0.53% against the Greenback, although the New Zealand dollar was a bit on the backfoot against the US unit, down by 0.25% to 0.6746.

Further afield, the Brazilian real tacked on another 0.9% against the US currency to reach 3.5873 after local newspaper Folha de Sao Paolo reported the PMDB party was set to break ties with the government on March 29.

According to a survey conducted by DataFolha on 19 March 68% of those polled voiced support for president Dilma Rousseff to be impeached, versus the 60% who supported the same in February.

The Greenback was also lower against the Russian ruble in afternoon trading, with gains in Brent oil futures cited by some market commentary as the main driver.

Reports on Tuesday indicated that Iraq, Saudi Arabia and Nigeria would support a decision by the Organisation of Petroleum Exporting Countries to freeze output when they met in April.

The People’s Bank of China reduced its fixing for the value of the yuan against the Greenback by 0.23% to 6.4971.