Forex – GBP/USD gains as Fed sticks with loose monetary policies

February 18, 2013

Monetary

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Investing.com – The pound rose against the dollar on Wednesday after the Federal Reserve said it was leaving interest rates near zero and was sticking with its monthly stimulus programs.

In US trading on Wednesday, GBP/USD was trading at 1.5796, up 0.21%, up from a session low of 1.5725 and off from a high of 1.5816.

The pair was likely to find support at 1.5675, Mondays low, and resistance at 1.5892, the high from Jan. 23.

The dollar fell after the Federal Reserve announced it was sticking with loose monetary policies, including its USD85 billion monthly bond-purchasing program, known as quantitative easing, which weakens the dollar as a side effect.

Although strains in global financial markets have eased somewhat, the Committee continues to see downside risks to the economic outlook, the Federal Open Market Committee in charge of setting interest rates said in a statement.

Earlier Wednesday, The Commerce Department reported that the US gross domestic product contracted for the first time since the second quarter of 2009 in the three months ending December, shrinking by 0.1%.

Economists were forecasting growth of 1.1% after a 3.1% expansion in the preceding quarter,.

A 6.6% decline in government spending and a significant drop in private inventories contributed to the contraction, which did come with several silver linings.

The report added that consumer spending rose by 2.2% and business investment was 8.8% higher in the fourth quarter of last year.

Elsewhere, payroll processor ADP revealed that the US private sector added 192,000 jobs in January, well above expectations for an increase of 165,000.

The pound, meanwhile, was down against the euro and up against the yen, with EUR/GBP trading down 0.36% at 0.8588 and GBP/JPY up 0.72% at 144.02.