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Forex - GBP/USD erases gains after ECB conference

ForexDec 06, 2012 10:40AM ET
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Investing.com - The pound erased gains against the U.S. dollar on Thursday, following downbeat comments by European Central Bank President Mario Draghi and after the Bank of England left its monetary policy unchanged.

GBP/USD pulled away from 1.6128, the pair's highest since December 4, to hit 1.6080 during U.S. morning trade, slipping 0.10%.

Cable was likely to find support at 1.6021, the low of December 3 and resistance at 1.6134, the high of November 2.

ECB President Draghi said the bank now expects the euro zone economy to contract by between 0.4% and 0.6% this year and to shrink by 0.3% to 0.9% in 2013. The ECB expects the euro zone economy to return to growth only in 2014, expanding between 0.2% and 2.2%.

The central bank also cut the inflation outlook to 2.5% in 2012 and 1.1% to 2.1% in 2013 and left rates unchanged at 0.75%, in a widely expected decision.

Earlier in the day, the BoE kept interest rates on hold at 0.5% and left the size of its asset purchase program unchanged at GBP375 billion, in a widely anticipated decision.

The announcement came after official data showed that the U.K. trade deficit widened to GBP9.5 billion in October from GBP8.4 billion the previous month as export demand fell.

Sentiment on the pound remained fragile after Chancellor George Osborne said Wednesday that government forecasts showed that the U.K. would miss a key deficit reduction total, prompting ratings agency Fitch to warn that Britain could lose its triple-A rating.

The pound was higher against the euro with EUR/GBP dropping 0.48%, to hit 0.8079.

Also Thursday, the U.S. Department of Labor said the number of people who filed for unemployment assistance last week fell to 370,000 from 395,000 in the previous week, better than analysts’ forecasts for a decline to 380,000.

Jobless claims for the preceding week were revised up to 395,000 from a previously reported 393,000.

Forex - GBP/USD erases gains after ECB conference

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