2021.09.0712:49:00UTC+00Pound Falls Amid Risk Aversion

The pound weakened against its major rivals in the European session on Tuesday amid risk aversion, as investors looked to the European Central Bank's policy meeting for clues on pulling back pandemic-era stimulus.

A recent spike in euro zone inflation and positive economic indicators fueled hopes that policymakers could start a discussion on changes to its bond purchases sooner rather than later.

Worries over reduced policy support along with a slowdown in global growth prospects kept sentiment subdued.

Survey data from the Lloyds Bank subsidiary Halifax showed that UK house price annual inflation slowed further in August, but the average price for a residential property hit a fresh record high.

The house price index climbed 7.1 percent year-on-year following a 7.6 percent rise in the previous month.

The pound weakened to 0.8614 against the euro, its lowest level since July 21. On the downside, 0.88 is possibly seen as its next support level.

Revised data from Eurostat showed that the euro area recovered at a faster-than-estimated pace in the second quarter from the Covid-driven downturn.

Gross domestic product grew 2.2 percent sequentially in the second quarter, bigger than the initial estimate of 2.0 percent. The growth reversed the 0.3 percent fall in the first quarter and the 0.4 percent drop in the fourth quarter of 2020.

The pound depreciated to 5-day lows of 1.3768 against the greenback and 1.2598 against the franc, off its early highs of 1.3857 and 1.2665, respectively. The next possible support for the pound is seen around 1.36 against the greenback and 1.24 against the franc.

The pound retreated from a prior high of 152.22 against the yen, dropping to a 5-day low of 151.50. The pound is likely to test support around the 150.00 level, if it drops further.

Preliminary data from the Cabinet Office showed that Japan's leading index decreased in July after rising in the previous month.

The leading index, which measures the future economic activity, fell to 104.1 in July from 104.6 in June. In May, the index was 103.1.