Forexpros – The pound was little changed against the U.S. dollar on Wednesday, following the release of significantly weaker-than-forecast U.K. second quarter growth data, as risk appetite was boosted by remarks from a senior European Central Bank policymaker.
GBP/USD hit 1.5469 during European afternoon trade, the pair’s lowest since July 13; the pair subsequently consolidated at 1.5498, dipping 0.04%.
Cable was likely to find support at 1.5412, the low of July 13 and resistance at 1.5550, the session high.
Market sentiment firmed up after ECB Governing Council member Ewald Nowotny said that there were some arguments in favor of giving the euro zone’s bailout fund, the European Stability Mechanism, a banking license, which would increase its firepower to fight the debt crisis in the euro zone.
But investors remained cautious as the yield on Spanish 10-year government bonds remained above the 7.50% level, beyond the 7% threshold widely considered unsustainable in the long run, fuelling concerns that a full-scale sovereign bailout is inevitable.
Sterling fell to the session low against the dollar earlier after official data showed that the U.K. economy contracted the most since the first quarter of 2009 in the three months to June.
The Office for National Statistics said the U.K.’s gross domestic product contracted by 0.7% in the second quarter, far more than the 0.2% contraction economists had forecast, extending Britain’s recession into a third quarter.
The U.K.’s economy shrank by 0.3% in the first three months of 2012.
Year-over-year, U.K. economic growth contracted 0.8% in the second quarter, disappointing expectations for a decline of 0.3%.
The report said that the service sector shrank by 0.1% during the quarter, while industrial output declined by 1.3%. Meanwhile, construction sector output dropped by 5.2%.
The ONS said that the extra public holiday for the Diamond Jubilee and poor weather weighed on economic activity.
The pound pulled back from near three-and-a-half year highs against the euro, with EUR/GBP rising 0.69% to 0.7831.
Later in the day, the U.S. was to publish official data on new home sales, as well as a report on crude oil stockpiles.
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