Forex Pros – The pound extended early gains against the U.S. dollar on Wednesday, climbing to a four-day high after the Bank of England indicated that interest rates would rise from the third quarter of 2011 to tackle high inflation.
GBP/USD hit 1.6504 during European early afternoon trade, the pair’s highest since May 5; the pair subsequently consolidated at 1.6484, surging 0.72%.
Cable was likely to find support at 1.6269, Monday’s low and a three-week low and short-term resistance at 1.6573, the high of May 4.
The BoE said there was a good chance that the U.K. inflation rate would hit 5% in 2011 and was likely to stay above the 2% target throughout 2012. It upgraded its inflation forecast, saying it was based on a rate increase in the third quarter and then a rise each quarter of 2012.
But it cut its economic growth forecast with the risks “skewed to the downside.”
Also Wednesday, official data showed that Britain’s trade deficit widened more-than-expected in March.
The Office for National Statistics said that the goods trade gap widened to GBP7.66 billion from GBP6.99 billion in February, some way above the GBP7.25 billion pounds economists had expected.
The pound was also sharply higher against the euro, with EUR/GBP tumbling 1.03% to hit 0.8712.
Later in the day, the U.S. was to publish official data on its trade balance. In addition, the country was to publish government data on crude oil inventories and the federal budget balance.
ForexPros.com
