Pound Declines Ahead Of U.K. CPI

The pound fell against its major rivals in European morning deals on Monday, as traders await U.K. CPI data for February, due tomorrow. 

The U.K. consumer price inflation is expected to have improved 0.1 percent on year in February, slower than the 0.3 percent growth registered last month. January reading was the lowest since records began. 

Core inflation, which strips out food, energy, alcohol and tobacco prices, is forecast to increase 1.3 percent annually in February, after a 1.4 percent advance in the previous month. 

The Bank of governor Mark Carney has already admitted that low inflation is likely to persist for sometime. In his testimony early this month, Carney said inflation is likely to remain "near" zero for the rest of this year, but it could head back towards BoE's target within two years. The BoE chief also hinted at a rate cut from its current record low of 0.5 percent, if low inflation expectations became entrenched in the UK. 

Meanwhile, European stocks are trading higher amid expectations the global liquidity situation will remain benign for some time to preserve growth and combat deflationary pressures exacerbated by the rapid decline in oil prices. 

German Chancellor Angela Merkel will receive her Greek counterpart in Berlin today amid reports that Merkel's unrelenting stance towards austerity has not made her popular in Greece. 

After weeks of difficult relations, both leaders are expected to tone down emotions and reaffirm their mutual goal of maintaining Greece in the euro zone. EU leaders on Friday asked Greece to come up with a more concrete reform plan in the coming days so that bailout talks can speed up. 

The pound, which advanced to 4-day highs of 1.4634 against the franc and 1.4989 against the dollar earlier, retreated to 1.4552 and 1.4857, respectively. Continuation of the pound's downtrend may take it to support levels of around 1.43 against the franc and 1.48 against the greenback. 

The pound pared gains to 178.38 against the yen and 0.7260 against the euro, from early highs of 179.67 and 0.7227, respectively. If the pound continues slide, 175.00 and 0.73 are seen as its downside target levels against the yen and the euro, respectively. 

Looking ahead, the European Central Bank President Mario Draghi will testify on monetary policy before the European Parliament's Economic and Monetary Affairs Committee, in Brussels, at 10:00 am ET.

At the same time, U.S. existing home sales data for February is set for release. 

Eurozone flash consumer sentiment index for March is due at 11:00 am ET. 

Subsequently, the Federal Reserve Governor Stanley Fischer is set to give a speech titled "Monetary Policy Lessons and the Way Ahead" at the Economic Club of New York.