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Forex - GBP/USD gains as market braces for Fed stimulus move

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Shutterstock photo - The pound firmed against the dollar on Tuesday as the Federal Reserve kicked off a policy meeting that many expect will end in a decision to taper stimulus programs such as monthly asset purchases albeit on a very gradual basis.

In U.S. trading on Friday, GBP/USD was trading at 1.5913, up 0.09%, up from a session low of 1.5885 and off from a high of 1.5936.

Cable was likely to find support at 1.5776, Friday's low, and resistance at 1.5963, Monday's high.

Earlier Tuesday, the Fed kicked off a two-day a policy meeting, with many avoiding the dollar on uncertainty as to whether the U.S. central bank will announce plans to begin tapering its USD85 billion monthly bond-buying program, which weakens the dollar by driving down interest rates to spur recovery.

The dollar remained soft on the notion that the Fed will only slightly trim the amount of bonds it buys each month if it decides to adjust the policy at all.

Few, if any, expect the Federal Reserve to hike interest rates any time soon.

Elsewhere, soft increases in the U.S. cost of living kept the greenback weak as well.

The U.S. consumer price index rose by 0.1% in August, missing expectations for a 0.1% gain.

The core consumer price index, which is stripped of volatile food and energy prices, rose 0.1% in August, in line with forecasts.

Meanwhile across the Atlantic, the Office for National Statistics reported that U.K. consumer price inflation ticked down to 2.7% on a year-over-year basis in August from 2.8% in July, in line with economists' forecasts.

Core CPI remained unchanged at 2% last month, compared to expectations for an uptick to 2.1%.

Consumer prices rose by 0.4% on the month in August, compared to expectations for a 0.5% increase.

The pound, meanwhile, was down against the euro and up against the yen, with EUR/GBP up 0.10% at 0.8395 and GBP/JPY up 0.26% at 157.92.

On Wednesday, all eyes will focus on the Federal Reserve. Chairman Ben Bernanke is to hold a press conference after the rate announcement.

Elsewhere, the U.S. is to release official data on building permits and housing starts.

The Bank of England is to release the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank's perspective. - offers an extensive set of professional tools for the financial markets.

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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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