Forex - GBP/USD dips as dollar gains on Draghi comments, China rate cut

Posted on at - The pound edged lower against an advancing dollar on Friday, as investors sought safety in the liquid U.S. currency in wake of dovish comments from European Central Bank President Mario Draghi, while a surprise Chinese rate cut boosted the greenback as well.

Forex - GBP/USD dips as dollar gains on Draghi comments, China rate cutPound slumps as dollar firms on Draghi comments, Chinese rate cut

In U.S. trading on Friday, GBP/USD was down 0.27% at 1.5650, up from a session low of 1.5628 and off a high of 1.5714.

Cable was likely to find support at 1.5588, Wednesday's low, and resistance at 1.5737, Thursday's high.

The dollar rose on safe-haven demand after ECB President Mario Draghi reiterated on Friday that the central bank is prepared to act rapidly if low inflation persists.

Draghi also expressed concerns over the euro zone's weak growth, pointing out he saw no improvements in the coming months.

The ECB head was speaking at the 24th European Banking Congress "Reshaping Europe," in Frankfurt, and his comments sparked expectations for fresh stimulus.

The ECB's current stimulus program includes purchases of asset-backed securities and covered bonds, though markets are keeping a close eye out for plans to announce purchases of government debt, a stimulus tool known as quantitative easing.

Also supporting the dollar was news that China cut its benchmark one-year deposit rate by 25 basis points to 2.75% and trimmed its one-year lending rate by 40 basis points to 5.6%.

Upbeat U.S. data released on Thursday continued to support the dollar as well.

The Federal Reserve Bank of Philadelphia reported that its manufacturing index improved to 40.8 this month from 20.7 in October.

Analysts had expected the index to decline to 18.5 in September.

Also on Thursday, the Labor Department reported that the U.S. consumer price index was unchanged in October, beating expectations for a 0.1% dip.

On a year-over-year basis consumer prices rose 1.7% last month, unchanged from September, and stronger than market calls for a 1.6% jump.

Core inflation, which strips out volatile food and energy components, rose by 0.2% during the month, pushing the annual rate up to 1.8%, both figures in line with market forecasts.

Meanwhile in the U.K. on Friday, the Office for National Statistic reported that public-sector net borrowing rose by £7.05 billion in October, after a revised increase of £10.57 billion the previous month.

Analysts had expected public sector net borrowing to rise by £6.90 billion.

Elsewhere, sterling was up against the euro, with EUR/GBP down 1.00% at 0.7913, and down against the yen, with GBP/JPY down 0.60% at 184.33.

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