FX round-up: Sterling slips against backdrop of EU summit, Turkish lira extends rally

Sterling was lower on Wednesday as markets waited on possible headlines out of the European Union's leaders summit in Brussels, although in theory little was expected in terms of fresh progress.

Indeed, expectations appeared to be building for both sides to pursue delaying tactics in a bid to take any decision right down 'to the wire'.

Against that backdrop, according to Reuters, European diplomats said the bloc's message to the Prime Minister would depend on her own approach, claiming that when they last met, in Salzburg, she was "uncompromising".

Linked to the above, European Commission chief, Jean Claude Juncker, was expected to outline the EU executive's contingency plans in case of a 'no deal' scenario.

Against that backdrop, as of 1608 BST, the pound was 0.38% lower versus the Greenback at 1.31322 and by 0.05% against the euro to 1.1382.

Also weighing on Sterling, earlier ONS reported that the year-on-year rate of increase in UK consumer prices fell by a much larger-than-expected three tenths of a percentage point in September to 2.4% (consensus: 2.6%).

On the back of those figures, economists at Barclays Research told clients: "Overall, the September data increases our conviction that UK CPI is likely to be printing back close to the BoE 2% target in early 2019.

"Underlying inflation indicators were largely at odds with the strength seen in the UK headline inflation prints in the past few months, so it is reassuring to see an inflation print that is comparatively undistorted by erratic component moves."

In parallel, the US dollar spot index was higher by 0.30% to 95.3330, despite a weak reading on US housing starts.

According to the Department of Commerce, housing starts declined at a 5.3% month-on-month clip in September to reach an annualised rate of 1.201m.

Economists had forecast a reading of 1.218m.

Further afield, the US dollar was off its best levels of the day against the Russian rouble, edging up by 0.04% to 65.3843 and was down by 1.96% to 5.5742 versus the Turkish lira.

Boosting the Turkish currency, US Secretary of State Michael Pompeo, reportedly signaled that some sanctions against Ankara might be lifted.

The US dollar was also off its best levels against the Mexican peso, paring an earlier rise to trade just 0.29% higher to 18.8064, but was ahead by 1.04% versus the Argentine peso at 36.2890.