Forex Today: Soft UK inflation weighs on Pound Sterling, US Dollar awaits housing data

Here is what you need to know on Wednesday, July 19:

Pound Sterling weakens against its major rivals early Wednesday following the softer-than-expected inflation readings for June. Eurostat will release revisions to the Harmonized Index of Consumer Prices (HICP) prints for June and the US economic docket will feature Housing Starts and Building Permits.  

Inflation in the UK, as measured by the change in the Consumer Price Index (CPI), declined to 7.9% on a yearly basis in June from 8.7% in May. This figure came in lower than the market expectation of 8.2%. Moreover, the Core CPI edged lower to 6.9% from 7.1% in the same period, while the Producer Price Index (Input) declined 2.7%. Finally, the Retail Price Index rose 0.3% on a monthly basis, down from a 0.7% increase recorded in May. Following these reading, GBP/USD came under heavy bearish pressure and dropped to its lowest level in a week below 1.2950.

UK CPI inflation slows sharply to 7.9% in June, disappoints BoE hawks.

Reflecting the broad GBP weakness, EUR/GBP was last seen trading at its highest level since late May above 0.8650 and GBP/JPY was down 0.3% at 180.50.

On Tuesday, the US Dollar Index (DXY) managed to edge higher in the early American session despite mixed macroeconomic data releases but lost its bullish momentum. The risk-positive atmosphere made it difficult for the US Dollar to gather further strength and the DXY posted small gains. Early Wednesday, the DXY stays in positive territory above 100.00.

EUR/USD stays on the back foot and edges lower toward 1.1200 in the early European session. The sharp upsurge seen in EUR/GBP, however, helps the pair limit its losses for the time being. Annual HICP for the Eurozone is expected to be confirmed at 5.5%.

In the Asian session, the data from New Zealand revealed that the annual CPI declined to 6% in the second quarter from 6.7% in the first quarter, compared to the market expectation of 5.9%. NZD/USD edged higher with the initial reaction but reversed its direction heading into the European session. As of writing, the pair was down more than 0.5% on the day at 0.6230.

Following Tuesday's choppy action, USD/JPY gained traction and climbed above 139.50 in the European morning on Wednesday.

Gold benefited from the extended slide seen in US Treasury bond yields on Tuesday and rose to its strongest level in nearly three months above $1,980. XAU/USD stays in a consolidation phase and fluctuates below $1,980 early Wednesday.

Bitcoin closed in the red for the fifth straight day on Tuesday but recovered back above $30,000 early Wednesday. Ethereum holds steady at around $1,900 after having registered small losses on Tuesday.