Forexpros – The pound erased gains against the U.S. dollar on Thursday, pulling away from a six-day high, as disappointing U.K. trade balance data weighed on demand for sterling while fresh concerns over the outlook for economic growth in the euro zone weakened market sentiment.
GBP/USD pulled back from 1.5686, the pair’s highest since August 1, to hit 1.5627 during European afternoon trade, falling 0.18%.
Cable was likely to find support at 1.5545, the low of August 6 and resistance at 1.5722, the high of July 26.
The pound came under pressure after official data showed earlier that the U.K. trade deficit widened more-than-expected in June, hitting GBP10.1 billion from a deficit of GBP8.4 billion the previous month.
Analysts had expected the U.K. trade deficit to widen to GBP8.6 billion in June.
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.
Meanwhile, market sentiment weakened after the ECB said in its monthly bulletin that the economic outlook for the euro zone 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 addition, optimism that the ECB will soon move to lower high Spanish and Italian borrowing costs seemed to fade as investors waited for more details of the bank’s proposed bond buying program to emerge.
Sentiment had found support earlier, as data showing that China’s annual consumer inflation fell to a 30-month low in July added to speculation that the country’s central bank may implement further monetary easing.
Elsewhere, the pound was higher against the euro with EUR/GBP shedding 0.33%, to hit 0.7872.
Later in the day, the U.S. was to publish official data on the trade balance and initial jobless claims.
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