Pound steady near 7-month lows before BoE

Pound steady near 7-month lows before BoE

4 September 2014, 12:18

On Thursday the pound was steady, as investors looked ahead to monetary policy announcements by the Bank of England and the European Central Bank later in the day.

GBP/USD was trading at 1.6453, holding above Wednesday’s lows of 1.6438, the weakest level since February. Cable was likely to find support at around 1.6380 and resistance at about the 1.65 level.

The BoE was widely expected to leave rates on hold on Thursday, even though the monetary policy committee was split seven to two in favor of a rate hike last month.

Expectations that the BoE will raise interest rates in the coming months have been boosted by economic reports pointing to a deepening recovery.

Data on Wednesday showed that the dominant U.K. service sector expanded at the fastest rate in 10 months in August, indicating that the outlook for growth in the third quarter remained strong.

However, sterling remained pressured after amid concerns that support for Scottish independence is gaining momentum ahead of a referendum due to take place on September 18.

Demand for the greenback continued to be underpinned as recent data indicated the economic recovery is continuing to strengthen.

Investors were looking ahead to the latest U.S. employment report, due for release on Friday, for further indications on the strength of the recovery in the labor market, a key factor in deciding the future path of monetary policy.

Elsewhere, the pound was little changed against the euro, with EUR/GBP at 0.7986, not far from Wednesday’s one-and-a-half week highs of 0.7995.

The euro found some support after data on Thursday showed that German factory orders rebounded 4.6% in July, easily outstripping forecasts for a 1.5% rise.

The euro has been hit by growing expectations that the ECB will announce quantitative easing measures as a way to stave off deflation after the annual rate of euro area inflation slowed to a five year low last month.

The upbeat data indicated that the euro zone’s largest economy could be recovering from weakness seen earlier in the year.

Sentiment on the single currency remained fragile ahead of the ECB’s monetary policy announcement later Thursday.

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