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Forex - GBP/USD gains as Fed keeps monetary policy loose

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Investing.com - The pound firmed against the dollar on Wednesday after the Federal Reserve announced it was making no change to interest rates or to stimulus programs that weaken the greenback by design to spur recovery.

In U.S. trading on Wednesday, GBP/USD was trading at 1.5128, up 0.20%, up from a session low of 1.5028 and off from a high of 1.5186.

The pair was likely to find support at 1.5028, the earlier low, and resistance at 1.5199, the high from March 5.

The Fed said earlier after its March monetary policy meeting concluded that it was keeping interest rates near zero and added it was making no changes to its USD85 billion monthly bond-buying program, which weakens the greenback by flooding the economy with liquidity to encourage investing and hiring.

Also weakening the dollar, however, were Federal Reserve suggestions that mandatory budget cuts kicking in were offsetting improvements taking place elsewhere in the U.S. economy.

A dovish outlook on inflation also convinced investors stimulus programs will remain in place for now, which sent the dollar falling.

"Labor market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy has become somewhat more restrictive," the Federal Reserve said in a statement.

"Inflation has been running somewhat below the Committee's longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable."

Meanwhile in the U.K., Chancellor George Osborne cut the 2013 economic growth forecast to 0.6% from a previous forecast of 1.2%.

The Bank of England also addressed monetary policy this month, and the minutes of that meeting revealed that three policymakers, including Governor Mervyn King, voted in favor of more quantitative easing, unchanged from the February meeting.

Meanwhile, official data showed that the claimant count in the U.K. fell by 1,500 in February, less than an expected decline of 5,000, while the unemployment rate remained unchanged at 7.8%.

The pound, meanwhile, was down against the euro and up against the yen, with EUR/GBP trading up 0.43% at 0.8571 and GBP/JPY up 1.00% at 145.13.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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