Forexpros – The pound was higher against the U.S. dollar on Wednesday, but gains were limited as investors remained cautious after the Federal Reserve’s latest policy meeting and ahead of Italian and German bond auctions.
GBP/USD hit 1.5525 during European morning trade, the daily high; the pair subsequently consolidated at 1.5502, adding 0.17%.
Cable was likely to find support at 1.5423, the low of November 25 and resistance at 1.5628, Tuesday’s high.
At its final policy meeting of the year on Tuesday, the Fed noted modest improvement in the U.S. economy but added that market turbulence in the face of Europe’s debt woes posed a big risk.
Fed officials reiterated that short-term interest rates are likely to stay close to zero until mid-2013 at least.
Italy’s Treasury was to auction as much as EUR3 billion of debt maturing in 2016 later in the day, while Germany planned to sell EUR5 billion of two-year notes. Italian borrowing costs rose back above 7% ahead of the sale.
Meanwhile, markets were jittery after German Chancellor Angela Merkel reiterated her opposition to increasing the EUR500 billion lending limit for the permanent euro zone bailout fund, the European Stability Mechanism, which should come into effect from the middle of next year.
Elsewhere, sterling was up against the euro with EUR/GBP retreating 0.20%, to hit 0.8405.
Also Wednesday, Bank of England Chief Economist Spencer Dale said the U.K. economy may be facing at least one quarter of contraction before a “gentle recovery” in the second half of next year.
Later in the day, the U.K. was to produce government data on employment, including reports on claimant count change, the unemployment rate and average hourly earnings.
The U.S. was also to produce official data on import prices and crude oil stockpiles.
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