Investing.com - The pound weakened broadly on Tuesday after data showed that U.K. inflation turned negative again in September, while the Australian and New Zealand dollars also fell after weak trade data out of China.
GBP/USD was down 0.66% to 1.5258 after hitting three-week highs of 1.5388 earlier in the session.
The drop in sterling came after the Office for National Statistics reported that the consumer price index fell by 0.1% in September from a year earlier, after a flat reading in August.
The weak inflation data dampened expectations for higher interest rates from the Bank of England.
Sterling had strengthened earlier after brewer SABMiller (L:SAB) accepted a takeover proposal from Anheuser-Busch Inbev SA (N:BUD), in a deal worth £69 billion.
The Australian and New Zealand dollars retreated from multi-week highs after weak Chinese trade data brought fears over slowing global growth back into focus.
AUD/USD was down 0.54% to 0.7322, off Monday’s ten-week highs of 0.7381 and NZD/USD was last down 0.45% at 0.6687 from Monday’s two month highs of 0.6739.
The decline in the growth linked currencies came after official data showing that Chinese imports tumbled 20.4% in September on a year-over-year basis, the eleventh straight monthly decline.
The steep drop underlined concerns over weakening demand for the world’s second largest economy. China is Australia and New Zealand's top export market.
The Aussie and the kiwi had been boosted in recent sessions by diminished expectations that the Federal Reserve will hike interest rates before the years end.
The Canadian dollar was also lower, with USD/CAD advancing 0.45% to 1.3054.
The dollar was also lower against the euro and the yen, with EUR/USD up 0.21% to 1.1384 and USD/JPY down 0.25% to 119.73.
The euro eased after data showing that the ZEW index of German economic sentiment deteriorated to the lowest level in a year this month as the emissions scandal at carmaker Volkswagen (DE:VOWG) and weakness in emerging markets dampened the outlook for the euro zone's largest economy.
USD/CHF was last at 0.9597, off 0.32% for the day.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was near three-week lows at 94.81.
Investors were looking to U.S. economic reports on retail sales and inflation later in the week for further indications on the possible direction of monetary policy.