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Forex - Pound broadly higher after BoE updates guidance

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Investing.com -

Investing.com - The pound was trading close to session highs against the dollar on Wednesday after the Bank of England upgraded its forward guidance on rates and revised up its forecast for economic growth this year.

GBP/USD hit 1.6559, the highest since January 30 and was last up 0.45% to 1.6524.

Cable was likely to find support at 1.6400 and resistance at 1.6605, the high of January 29.

Speaking after the bank published its latest quarterly inflation report, BoE Governor Mark Carney said the U.K. unemployment rate has fallen much faster than the bank anticipated, and will hit the initial 7% threshold "in the spring".

In the six months since forward guidance was implemented the U.K. unemployment rate has fallen to 7.1% from 7.8%.

The bank outlined new forward guidance, saying that it will not raise rates until the spare capacity in the U.K. economy has been fully absorbed, which it does not see happening until 2015.

The bank said it would consider a broader range of indicators, including the unemployment rate, wages and productivity and business surveys when deciding to raise rates, and added that when rates rise they will do so only gradually.

Sterling was sharply higher against the broadly weaker euro, with EUR/GBP dropping 0.89% to 0.8215, the weakest level since February 3.

The drop in the euro came after European Central Bank Executive Board member Benoit Coeure said in an interview with Reuters that the bank is considering a negative deposit rate very seriously.

He added that the ECB does not see deflation in the euro area, adding that the bank sees low inflation, which should increase slowly back to its 2% target.

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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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