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Pound gains on IMF forecast, U.K. data

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Investing.com - The pound rose against the dollar earlier Tuedsday after the International Monetary Fund said it was hiking the U.K.'s 2014 growth forecast by more percentage points than any other major European country, while mixed-but-solid British data also bolstered the pair.

In U.S. trading on Tuesday, GBP/USD was trading at 1.6467, up 0.24%, up from a session low of 1.6400 and off a high of 1.6486.

Cable was likely to find support at 1.6396, Monday's low, and resistance at 1.6508, the high from Jan. 13.

The pound enjoyed support after the IMF hiked Britain's 2014 growth forecast to 2.4% from 1.9% in October, more than any other major European economy.

Also in the U.K., the Confederation of British Industry said its index of industrial order expectations fell to -2 this month from 12 in December, well below expectations of a reading of 10.

However, the CBI said the volume of total orders for the next three months rose to 22 from 14, the highest level since April 2012. New orders in the three months to January saw their strongest growth in nearly three years.

The data also showed that the quarterly business outlook balance ticked down to 21 in the three months to January from 24 in the three months to October, which had been its highest since April 2010.

In revisions to its World Economic Outlook report published on Tuesday the IMF said it expects the global economy to grow by 3.7% in 2014, up from an October forecast of 3.6% growth.

The news fueled expectations for central banks to wind down stimulus programs such as bond purchases going forward, including the Bank of England and the Federal Reserve especially, as the multilateral lending institution predicted the U.S. economy to expand 2.8%, up from an October forecast of 2.6%.

Many market participants expect the Fed to trim its quantitative easing program to USD65 billion from the current USD75 billion at its next policy meeting on Jan. 29.

Central bank bond purchases aim to prop up the economy by suppressing long-term interest rates, thus weakening the dollar as a side effect as investors flock to asset classes like stocks.

Profit taking wiped out the greenback's gains, however.

Sterling was higher against the euro, with EUR/GBP down 0.28% to 0.8227, and up against the yen, with GBP/JPY up 0.20% as 171.51.

On Wednesday, the U.K. is to release official data on the change in the number of people unemployed and the unemployment rate, as well as data on average earnings and public sector borrowing.

Also on Wednesday, the Bank of England is to publish the minutes of its most recent policy setting meeting.

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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.


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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