Forexpros – The euro edged lower against the pound on Thursday, as hopes for action from the European Central Bank to stem the debt crisis in the euro zone waned, but weak U.K. trade data limited the euro’s losses.
EUR/GBP hit 0.7879 during European morning trade, the pair’s lowest since August 3; the pair subsequently consolidated at 0.7882, slipping 0.19%.
The pair was likely to find support at 0.7842, the low of August 3 and resistance at 0.7900, the session high.
Optimism that the ECB will soon act to lower high Spanish and Italian borrowing costs faded as investors waited for more details of the bank’s proposed bond buying program to emerge.
Sentiment on the euro was also hit after the ECB said in its monthly bulletin that the economic outlook faced a number of downside risks, with financial market tensions and their potential impact on growth posing the key threats.
The ECB revised down its forecast for economic growth to 0.6% in 2013, down from 1% previously and forecast a 0.3% contraction in growth this year, slightly worse than its previous forecast of for a 0.2% contraction.
In the U.K., official data showed that the goods deficit jumped to GBP10.1 billion in June, up from GBP8.36 billion in May, on the back of a 7% drop in exports and worse than expectations for a deficit of GBP8.6 billion.
The data came one day after the Bank of England said that the U.K. economy would barely grow this year and cut its forecasts for the coming years in its quarterly inflation report.
However, BoE Governor Mervyn King did indicate that a rate cut was unlikely in the coming months, saying it would damage some financial institutions.
Overall market sentiment remained supported by prospects for further monetary easing by China.
Overnight, official data showed that China’s consumer price index rose at an annualized rate of 1.8% in July, slower than the 2.2% rate of the previous month, indicating that China’s central bank has more scope for monetary easing, following interest rates cuts in June and July.
The euro was lower against the U.S. dollar and the yen, with EUR/USD slipping 0.19% to 1.2341 and EUR/JPY dipping 0.07% to 96.91.
Later in the day, the U.S. was to release official data on the trade balance and a weekly report on initial jobless claims.
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