Forexpros — The pound was down against the U.S. dollar on Wednesday, slumping to a daily low ahead of the Bank of England’s quarterly inflation report and subsequent press conference by Governor Mervyn King later in the day.
GBP/USD hit 1.6231 during early European trade, a daily low; the pair subsequently consolidated at 1.6237, shedding 0.48%.
Cable was likely to find support at 1.6175, Tuesday’s low and three-week low and resistance at 1.6409, Tuesday’s high.
The inflation report appeared likely to forecast lower inflation and slower growth in the short run, reaffirming the central bank’s position to keep interest rates at a record low of 0.5%.
Recent weak U.K. data has highlighted concerns over the uneven nature of the economic recovery, as the government implements the harshest austerity measures and spending cuts since World War 2.
Meanwhile, the Federal Reserve pledged on Tuesday to keep its benchmark interest rate at an all-time low, adding that it will maintain a loose monetary policy until “at least through mid-2013.”
In a statement, the Fed said growth was much slower than expected and the labor market had deteriorated, underlining concerns over the U.S. economic outlook.
“The FOMC now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually” from the July level of 9.1%, the statement said.
“Moreover, downside risks to the economic outlook have increased,” the statement added.
The Fed also indicated that it “discussed the range of policy tools available to promote a strong economic outlook recovery in a context of price stability” and said it was prepared to employ the tools “as appropriate”.
Elsewhere, the pound was also down against the euro, with EUR/GBP gaining 0.38% to hit 0.8844.
Later in the day, the U.S. was to produce data on the federal budget balance as well as reports on crude oil stockpiles and wholesale inventories.
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