Forex - GBP/USD slides on dovish BoE report, G20 policy talks


Shutterstock photo - The pound extended Tuesday's losses against the dollar on Wednesday after the Bank of England warned that growth will be weak going forward.

The dollar, meanwhile, strengthened to 6-month highs against the pound ahead of a Group of 20 meeting due to open in Moscow later this week with weakening exchange rates seen taking center stage.

In U.S. trading on Wednesday, GBP/USD was trading at 1.5543, down 0.75%, up from a session low of 1.5523 and off from a high of 1.5689.

The pair was likely to find support at 1.5491, the low from Aug. 2, 2012, and resistance at 1.5689, the earlier high.

Bank of England Governor Mervyn King said earlier that U.K. growth will be weak and recovery still faces challenges, which sent Cable falling.

On the flipside, the U.S. dollar saw demand due to uncertainty surrounding an upcoming G20 meeting due to open in Moscow on Friday.

Earlier this week, the wealthier Group of Seven industrialized nations said in a statement that weakening currencies, the yen most notably, should not escalate into active devaluations, and talk G20 leaders at a Moscow meeting will address exchange rates and monetary policy later this week sent investors chasing the safety of the greenback on Wednesday.

G7 officials have said they believe that all exchange rates are market driven up to now but the dollar saw widespread demand on Wednesday amid uncertainty prior to the G20's Moscow meeting.

Meanwhile in the U.S., retail sales rose 0.1% in January, in line with expectations though off from a 0.5% gain in December, according to the Commerce Department.

Payroll tax increases took effect, which likely lowered demand for goods.
Nevertheless, core retail sales, which exclude automobile sales, increased by 0.2%, beating expectations for a 0.1% gain.

Also in the U.S., wholesale business inventories rose by 0.1% in December, missing expectations for a 0.3% increase, according to the U.S. Census Bureau.

Business inventories in November were revised to a 0.2% gain from a previously reported advance of 0.3%.

The pound, meanwhile, was down against the euro and down against the yen, with EUR/GBP trading up 0.73% at 0.8650 and GBP/JPY down 0.84% at 145.16.

On Thursday, the U.S. is to release the weekly government report on initial jobless claims.

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This article appears in: Investing , Forex and Currencies

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