Forexpros – The euro was lower against the pound in choppy trade on Wednesday, as concerns over the debt crisis in the euro zone weighed but the pound remained under pressure after the Bank of England cut inflation and growth forecasts.
EUR/GBP hit 0.8520 during European late morning trade, the session low; the pair subsequently consolidated at 0.8536, shedding 0.25%.
The pair was likely to find support at 0.8499, the low of November 9 and resistance at 0.8574, Tuesday’s high.
The single currency found support as the European Central Bank supported regional debt markets by buying Italian and Spanish government bonds.
The yield on 10-year bond yields fell back to 6.9%, having risen above the 7% threshold which is widely viewed as unsustainable in the long term on Tuesday. Spanish 10-year yields also eased off Tuesday’s three month high.
Later Wednesday, incoming Italian Prime Minister Mario Monti was due to meet with President Giorgio Napolitano to officially accept the post and present his new government.
In the U.K., the BoE’s quarterly Inflation Report said the bank believes economic growth will be “significantly weaker” than forecast in August, with the biggest threat posed by the debt crisis in the euro zone.
The central bank now sees a strong chance that annual growth rates will be below 1% throughout 2012 and indicated that it may have to add to its GBP275 billion asset purchase program.
The BoE also said it expected inflation to fall to 1.3% in two years time, adding that it expects inflation to fall below its 2% target by the end of 2012.
The report came after official data showed that the unemployment rate in the U.K. jumped to a 15-year high of 8.3% in October, while the number of people without a job on the wider ILO measure rose to a record high.
Meanwhile, the number of people claiming jobless benefit rose by 5,300 last month, far below analysts’ forecasts of a rise of 20,400.
The euro was also lower against the U.S. dollar, with EUR/USD shedding 0.53% to hit 1.3467.
Later in the day, the U.S. was to release official data on consumer price inflation and industrial production.
Forexpros
