GBP USD analysis: Dollar falls amid Fed easing speculation

NEW YORK (Forex News Now) – Sterling climbed against the dollar on Tuesday, after interest rate decisions by Australia and Japan’s central banks heightened speculation that the U.S. Federal Reserve will implement new monetary easing measures.

In late European afternoon currency market trading, GBP/USD hit 1.593, cable’s highest since Aug. 9. The currency pair later pulled back slightly to trade at 1.5896, up 0.42 percent on the day.

Earlier Tuesday, the Bank of Japan unexpectedly slashed interest rates to zero, and the Reserve Bank of Australia decided not to hike rates, defying forecasts and raising hopes that the Fed will follow suit in taking new steps to revive the faltering U.S. recovery.

Key policymakers at the U.S. central bank have said the Fed may indeed enact such measures if the economic outlook does not improve.

According to GBP USD analysis, cable was likely to touch support around last Thursday’s low, 1.5669, and encounter immediate resistance around the high of Aug. 6, 1.5998.

The pound’s gains also came on the back of an upbeat report by the market research firm Markit, which showed that activity in the U.K. services sector unexpectedly increased in September.

Elsewhere, sterling rose versus the yen: GBP/JPY traded at 132.37, up 0.31 percent, according to intraday analysis.