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Forex - GBP/USD hits 3-year lows as U.K. data, IMF weigh

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Shutterstock photo - The pound dropped to three-years lows against the U.S. dollar on Tuesday, as donwbeat U.K. manufacturing data continued to weigh on demand for sterling, while expectations for the Federal Reserve to soon saper its stimulus program supported the greenback.

GBP/USD hit 1.4813 during U.S. morning trade; the pair subsequently consolidated at 1.4818, retreating 0.89%.

Cable is likely to find support at 1.4813, the session low and a three-year low and resistance at 1.4981, the session high.

The pound came under pressure after the Office for National Statistics said that U.K. manufacturing production fell 0.8% in May, compared to expectations for a 0.3% increase.

Manufacturing production fell at an annual rate of 2.9% in May, compared to expectations for a 1.6% decline.

The ONS said industrial production was flat in May, disappointing expectations for a 0.2% increase, and was 2.3% lower on a year-over-year basis.

A separate report showed that the U.K. trade deficit widened to GBP8.49 billion in May, from a deficit of GBP8.43 billion in April. Economists had forecast a deficit of GBP8.47 billion.

The data dampened expectations that the economic recovery is gaining momentum, after data last week showed that service sector activity in the U.K. expanded at the fastest pace since March 2011 in June, while manufacturing activity expanded at the fastest rate in more than two years.

Earlier Tuesday, private sector reports showed that U.K. house prices rose in June, and retail sales increased last month.

Market sentiment also weakened after the International Monetary Fund lowered its growth estimate for the global economy to 3.1% in 2013, down from a previous estimate of 3.3%, citing a slowdown in emerging markets and a longer recession in Europe.

Meanwhile, demand for the dollar continued to be supported by expectations that the Federal Reserve will start to unwind its asset purchase program later this year.

However, the IMF raised its growth forecast for the U.K. economy to 0.9% this year, up from the 0.6% expansion it projected in April.

Sterling was lower against the euro with EUR/GBP gaining 0.30%, to hit 0.8632.

The euro found some support after Greece secured its next tranche of financial aid from creditors overnight.

But the single currency's gains remained limited after European Central Bank President Mario Draghi reiterated Monday that interest rates will remain at low levels for an extended period of time. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.

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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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