Forex - GBP/USD falls on U.S. monetary policy issues, U.K. data

The pound fell against the greenback on Tuesday after comments from Federal Reserve Chairman Ben Bernanke along with the minutes of Fed policy meetings released earlier left investors concluding that U.S. stimulus measures may scale back soon.

Soft U.K. retail sales data further pressured Cable lower as well.

In U.S. trading on Wednesday, GBP/USD was trading at 1.5037, down 0.76%, up from a session low of 1.5019 and off from a high of 1.5174.

The pair was likely to find support at 1.4832, the low from March 12, and resistance at 1.5281, Monday's high.

In prepared testimony, Bernanke told lawmakers earlier that ultra-loose monetary policy was providing "significant benefits" to the economic recovery and reiterated that the bank’s asset-purchasing program will remain in place for now.

Bernanke added withdrawing monetary stimulus could prompt interest rates to rise temporarily but could threaten the country's economic recovery as well as price stability.

"A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further," Bernanke said in prepared remarks of his testimony. 

"Such outcomes tend to be associated with extended periods of lower, not higher, interest rates, as well as poor returns on other assets. Moreover, renewed economic weakness would pose its own risks to financial stability."

Stimulus measures currently in place, such as the Fed's monthly USD85 billion bond-buying program, weaken the greenback by flooding the economy full of liquidity to keep interest rates low and encourage investing and hiring.

However, Bernanke added that U.S. central bank may scale back its stimulus measures "in the next few meetings" if the labor market makes noted improvements, which strengthened the U.S. dollar.

Separately, the Fed released the minutes of its latest monetary policy meeting on Wednesday revealing that several monetary authorities felt stimulus programs should begin unwinding in June.

Elsewhere Wednesday, National Association of Realtors reported that U.S. existing home sales rose 0.6% to 4.97 million units in April from March’s revised total of 4.94 million. 

Analysts were expecting U.S. existing home sales to rise 1.4% to 4.99 million units in April.
Meanwhile across the Atlantic, the  Office for National Statistics said U.K. retail sales fell 1.3% in April from March, the largest fall in a year and defying market calls for a flat reading.

Retail sales rose 0.5% from a year earlier, well below expectations for a 2.0% increase.

Separately, the minutes of the Bank of England’s May meeting showed that three policymakers, including Governor Mervyn King, voted in favor of more easing this month, unchanged from April.

The pound, meanwhile, was down against the euro and down against the yen, with EUR/GBP trading up 0.28% at 0.8540 and GBP/JPY down 0.25% at 154.89.

On Thursday, the U.S. is to release the weekly government report on initial jobless claims and official data on new home sales.