Forex - GBP/USD erases losses, but gains limited

The pound erased losses against the U.S. dollar on Thursday, easing off a two-and-a-half-year lows after the release of encouraging U.K. economic data, although sustained concerns over the country's outlook for growth contiued to weigh. 

GBP/USD pulled away from 1.5133, the pair's lowest since July 2010, to hit 1.5257 during European afternoon trade, adding 0.16%. 

Cable was likely to find support at 1.5011 and resistance at 1.5451, Wednesday's high. 

Industry data showed that an index of U.K. industrial order expectations improved to minus 14 in February from minus 20 the previous month, beating expectations for a reading of minus 15. 

A separate report showed that public sector net borrowing posted a deficit of GBP9.9 billion in January, compared to a surplus of GBP12.4 billion in December, whose figure was revised from GBP13.2 billion.

Analysts had expected U.K. public sector net borrowing to post a deficit of GBP11.2 billion in January. 


But sentiment on the pound remained vulnerable amid concerns over the faltering U.K. economy, which contracted by 0.3% in the three months to December, while the Bank of England warned last week that inflation would remain above target until 2016.

The pound fell sharply after Wednesday’s minutes of the BoE’s February meeting showed that policymakers were split six to three on whether to increase the bank's quantitative easing program to GBP400 billion from GBP375 billion, with Governor Mervyn King voting in favor of an increase.

At the previous meeting the voting had been eight to one in favor of keeping the stimulus program unchanged.

Separately, the dollar found support after the minutes of the Federal Reserve’s most recent meeting indicated that the bank may wind down its bond-buying program sooner than expected.

Elsewhere, sterling was sharply higher against the euro, with EUR/GBPtumbling 1% to 0.8633.

In the euro zone, data showed that the services purchasing managers’ index dropped from 48.6 to 47.3 in February, missing expectations for an increase to 49.2.

The euro zone manufacturing PMI fell to a seasonally adjusted 47.8 from a final reading of 47.9 in January. Analysts had expected the index to improve to 48.4.

Germany’s manufacturing PMI rose to 50.1 from a final reading of 49.8 in January, moving into expansion territory for the first time in 12 months, but below expectations for a tick up to 50.5.