Forex - GBP/USD trades close to 8-day low amid U.K. growth worries

Forexpros - The pound fell against the U.S. dollar on Wednesday, trading close to an eight-day low as significantly weaker-than-forecast U.K. second quarter growth data continued to weigh on demand for sterling, while a disappointing U.S. housing report pressured the greenback.

GBP/USD hit 1.5459 during U.S. morning trade, the pair’s lowest since July 13; the pair subsequently consolidated at 1.5475, falling 0.21%.

Cable was likely to find support at 1.5452, the low of July 13 and resistance at 1.5577, the high of July 11.

The pound remained under presssure after official data showed that the U.K. economy contracted the most since the first quarter of 2009 in the three months to June.

The Office for National Statistics said the U.K.’s gross domestic product contracted by 0.7% in the second quarter, far more than the 0.2% contraction economists had forecast, extending Britain's recession into a third quarter.

The U.K.’s economy shrank by 0.3% in the first three months of 2012.
Year-over-year, U.K. economic growth contracted 0.8% in the second quarter, disappointing expectations for a decline of 0.3%.

The report said that the service sector shrank by 0.1% during the quarter, while industrial output declined by 1.3%. Meanwhile, construction sector output dropped by 5.2%.

The ONS said that the extra public holiday for the Diamond Jubilee and poor weather weighed on economic activity.

Sterling found brief support earlier after European Central Bank Governing Council member Ewald Nowotny said that there were some arguments in favor of giving the euro zone’s bailout fund, the European Stability Mechanism, a banking license, which would increase its firepower to fight the debt crisis in the euro zone.

But investors remained cautious as the yield on Spanish 10-year government bonds remained above the 7.50% level, beyond the 7% threshold widely considered unsustainable.

Meanwhile, the dollar remained under pressure after data showing that U.S. new home sales fell more-than-expected in June sparked expectations for further easing measures by the Federal Reserve.

The U.S. Census Bureau said new home sales fell by 8.4% to a seasonally adjusted 350,000 units in June, compared to expectations for a decline of 2.6% to 372,000. New home sales for May were revised up to 382,000 units from a previously reported 369,000.

Elsewhere, the pound was lower against the euro with EUR/GBP climbing 0.77%, to hit 0.7838.