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GBP/USD retreats from highest close in more than two years ahead of Martin Weale statement

The sterling fell on Wednesday, after closing at the strongest level in more than two years against the greenback yesterday, ahead of BoE policy maker Martin Weales speech.

GBP/USD reached a session low at 1.6391 at 10:17 GMT, losing 0.33% for the day. Yesterday the pair closed at the highest level since August 2011. Support was likely to be received at December 9th low, 1.6324, while resistance was to be met at August 29th 2011 high, 1.6534.

Later today, Weale is expected to speak at the National Institute of Economic and Social Research in London about BoEs new policy of forward guidance.

According to Neil Mellor, a currency strategist at Bank of New York Mellon in London, cited by Bloomberg: “We’ve had a stellar run with sterling for quite some time now, it’s been on an uptrend against the dollar since mid-November. That alone provides every reason to expect some sort of curtailment in the trend.”

The pound had been the second best performer among ten developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. It had gained 5.3% in the past six months, just after the best performer, the New Zealand dollar. During the same period the US dollar declined by 0.2%.

The benchmark 10-year gilt yield was at 2.88%. The price of the 2.25% bond due in September 2023 was 94.71.

Gilts handed investors a loss of 3.5% this year through yesterday, according to Bloomberg World Bond Indexes, while U.S. Treasuries declined 2.5 percent.

Meanwhile, the US dollar received support after US policymakers unveiled an agreement to ease automatic spending cuts by about 60 billion USD over two years and cut nation’s deficit by 23 billion USD. US Senator Patty Murray, a Democrat, and Republican Representative Paul Ryan said that the budget proposal could prevent a government shutdown and could favor economy. The agreement sets a budget ceiling for the fiscal 2014 at 1.012 trillion USD and for the fiscal 2015 – a ceiling at 1.014 trillion USD.

The Federal Reserve may begin to scale back its 85-billion-USD monthly asset purchases at the committee’s policy meeting on December 17th-18th rather than wait until January or March, according to 34% of economists, participated in a Bloomberg survey on December 6th. In November’s survey, 17% of respondents projected a tapering in December.

Elsewhere, USD/JPY hit a session low at 102.41 at 07:46 GMT, losing 0.41% for the day. Support was likely to be received at December 6th low, 101.72, while resistance was to be encountered at December 10th high, 103.39.

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