Pound Trades Higher On Diminishing BoE Rate Cut Hopes

The pound traded higher against its key counterparts in the European session on Wednesday, as hopes for further rate cut by the Bank of England faded after Governor Mark Carney remarks that the recent sharp depreciation of the domestic currency since the Brexit vote and its effects on inflation would be taken into account at the next week's policy meeting.

"It's undoubtedly something we will take into account over the course of the next week as we sit down, update our forecast and make our policy decision," Carney told lawmakers on Tuesday.

The BoE's current path of monetary policy has positive impact on the U.K. economy, which include acceleration in inflation that props up growth, and a surge in exports, positively affecting the UK's balance sheet, he added.

Carney's comments spurred hopes that the BoE will keep interest rate unchanged at its meeting in November, in contrast to the September statement that backed a rate cut, unless there would be a significant change in the outlook for the economy.

Data from the British Bankers' Association showed U.K. mortgage approvals increased to a 3-month high in September.

The number of mortgages approved for house purchases rose to 38,252 in September from 37,241 in August. This was the highest since June, when approvals totaled 39,880.

The currency was lower in the Asian session amid risk aversion, weighed by falling oil prices and weak U.S. earning reports.

The pound bounced off to 1.2226 against the greenback, from an early low of 1.2157, and held steady thereafter. On the upside, 1.27 is possibly seen as the next resistance level for the pound.

The pound rose briefly to 1.2130 against the Swiss franc in early European deals and has been trading steadily afterwards. If the pound-franc pair extends advance, 1.25 is likely seen as its next resistance level.

Bouncing off from an early low of 126.63 against the Japanese yen, the pound edged higher to 127.50. Continuation of the pound's uptrend may see it challenging resistance around the region.

Survey data from the Shoko Chukin Bank showed that Japan's small business confidence strengthened in October.

The small business sentiment index rose to 48.3 from 47.7 in September. The index strengthened for the second consecutive month.

The pound rose to 0.8929 against the European currency early in the session and has been steady since then. The pound is seen finding resistance around the 0.86 mark.

Survey report by research group GfK showed that German consumer confidence is set to weaken to a 7-month low in November as weak global growth is expected to affect the domestic activity.

The forward-looking consumer sentiment index fell to 9.7 from 10.0 in October.

Looking ahead, Markit's U.S. flash PMI report for October, U.S. home sales data for September and U.S. crude oil inventories data are set to be published in the New York session.

Euro vs Sterling (FX:EURGBP)
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