The pound traded in a negative territory in early New York deals on Wednesday, as the Chancellor the Exchequer George Osborne downgraded U.K. inflation and growth forecasts for this year, amid headwinds from financial markets and weak global economy.
The Office for Budget Responsibility revised down the annual GDP estimate to 2 percent in 2016, from its previous estimate of 2.4 percent.
Consumer price inflation has also been cut to 0.7 percent this year, down from the 1.0 percent estimated previously.
The deficit is estimated to widen to GBP 55.5 billion in 2016-17, from earlier forecast of GBP 49.9 billion.
The OBR estimates public sector net borrowing to fall to 2.9 percent of GDP in this financial year, dropping to 1.9 percent in 2017-18, and then to 1 percent in 2018-19.
Investors now await the Bank of England’s monetary policy decision tomorrow, with expectations that the bank would further delay rate hike, as the U.K. economy appears rather weaker than at the November autumn statement.
The currency has been weakening against its major rivals in European deals.
The pound lost 0.68 percent to near 2-week low of 1.4053 against the greenback, from Tuesday’s closing quote of 1.4149. The pound is seen finding support around the 1.39 mark.
Data from the Labor Department showed that U.S. consumer prices fell modestly in the month of February, reflecting another steep drop in energy prices.
The Labor Department said its consumer price index dipped by 0.2 percent in February after coming in unchanged in January. Economists had expected prices to fall by 0.3 percent.
Extending early slide, the pound slid to 1.3911 against the Swiss franc, its weakest since March 2. The next possible support for the pound-franc pair may be found around the 1.38 region.
Pulling away from a high of 160.66 hit at 5:30 am ET, the pound slipped to 159.64 against the Japanese yen. On the downside, the pound may locate support around the 158.00 level.
The Bank of Japan does have the scope to lower rates further, Governor Haruhiko Kuroda said.
Speaking to lawmakers, the central bank chief said there was room to lower interest rates further.
The pound depreciated to 0.7885 against the euro, a level unseen since February 29. Continuation of the pound’s downtrend may see it finding support around the 0.80 area.
Figures from Eurostat showed that Eurozone construction output increased at the fastest pace in nearly four years in January, after falling in the previous month.
Construction output climbed a seasonally adjusted 3.6 percent month-over-month in January, in contrast to a 0.7 percent fall in the previous month, which was revised from a 0.6 percent drop reported earlier.
Looking ahead, at 1:30 pm ET, National Bank of Poland chief Marek Belka and European Central Bank chief Mario Draghi is expected to speak at the opening of an art exhibition in Frankfurt.
At 2:00 pm ET, the Federal Reserve will announce its decision on monetary policy. The Fed is expected to hold rates at 0.50 percent.
Following the announcement, Fed Chair Janet Yellen will hold the post-meeting press conference at 2:30 pm ET.
The material has been provided by InstaForex Company – www.instaforex.com