Forexpros – The pound extended gains against the U.S. dollar on Wednesday, boosted by hopes that the European Central Bank would ease monetary policy in order to calm investor nerves over the escalating crisis in the euro zone.
GBP/USD hit 1.5516 during European early afternoon trade, the pair’s highest since May 31; the pair subsequently consolidated at 1.5509, rallying 0.83%.
Cable was likely to find support at 1.5371, the session low and resistance at 1.5577, the high of January 20.
While the ECB was not widely expected to cut rates at its policy meeting later in the session, expectations mounted that the central bank could indicate that it is willing to ease policy as soon as next month, in a bid to help calm markets.
But investors remained jittery after Spain warned on Tuesday that it was having difficulty accessing credit markets, while uncertainty over the outcome of Greek elections on June 17 also weighed.
Earlier, revised data showed that the euro zone economy was stagnant in the first quarter, in line with preliminary estimates, but gross domestic product contracted at an annualized rate of 0.1% in the three months to March, compared to a preliminary flat reading.
In the U.K., a report showed that construction sector activity continued to expand in May, but the pace of growth moderated.
The Markit/CIPS U.K. construction purchasing managers’ index came in at 54.4 in May, down on April’s 55.8, but still well above the 50-point mark that separates growth from contraction. Economists had expected the index to decline to 54.2 in May.
The pound was also higher against the euro, with EUR/GBP shedding 0.31% to hit 0.8068.
The ECB rate announcement was to be followed by a press conference with bank head Mario Draghi to discuss the monetary policy decision and the economic outlook for the region.
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