Forex - GBP/USD holds gains as BoE, U.K. data support

The pound held gains against the U.S. dollar on Wednesday, as the minutes of the Bank of England's latest policy meeting and positive U.K. unemployment data continued to support demand for the greenback. 

GBP/USD hit 1.5538 during U.S. morning trade, the pair's highest since August 9; the pair subsequently consolidated at 1.5533, gaining 0.55%. 

Cable was likely to find support at 1.5421, the session low and resistance at 1.5557, the high of August 8.

The pound strengthened earlier, after the Office of National Statistics said the U.K. unemployment rate remained unchanged at 7.8% in June, in line with expectations. The number of people claiming unemployment benefits fell by 29,200 in July, better than expectations for a decline of 15,000.

Separately, the minutes of the BoE’s July meeting showed that the decision to provide forward guidance on future rate increases was not unanimous.

Last week the BoE announced plans to keep interest rates on hold at record lows as long as the U.K. unemployment rate remains above 7%.

The BoE set out three conditions under which forward guidance on rates would not apply. One of these says bank will consider raising rates if medium term inflation expectations rise above 2.5% over 18 to 24 months.

Monetary Policy Committee member Martin Weale wanted tougher measures to ensure that the pledge to hold rates at record lows did not lead to a pickup in inflation, but said he accepted the principles of forward guidance. 

Meanwhile, the greenback came under pressure after the U.S. Department of Labor said producer prices were flat last month, confounding expectations for a 0.3% increase, after rising 0.8% in June. The core producer price index eased up 0.1% in July, missing forecasts for a 0.2% increase.

The disappointing data raised fresh doubts over whether the economic recovery is strong enough for the Federal Reserve to begin phasing out its USD85 billion-a-month asset purchase program later this year. 

Sterling was higher against the euro with EUR/GBP declining 0.55%, to hit 0.8537. 

Also Wednesday, Eurostat said the euro zone’s economy expanded by 0.3% in the three months to June. Economists had expected quarter-on-quarter growth of 0.2%.

Separately, preliminary data showed that France’s economy expanded 0.5% in the second quarter, following two consecutive quarters of contraction. Economists had forecast growth of 0.2% quarter-on-quarter.

Germany’s economy expanded by 0.7% after growing 0.1% in the first quarter. Economists had forecast quarter-on-quarter growth of 0.6%.