GBP/USD near two-month highs ahead of Fed minutes

British pound was trading close to two-month highs against the US dollar on Wednesday, as market players focused on the minutes of Federal Reserve’s latest meeting, scheduled for release later today.

GBP/USD came off a session high at 1.5692 at 9:55 GMT, after which consolidation followed at 1.5670. Support for the pair was expected at August 19th low, 1.5608, while resistance was to be met at August 20th high and also a two-month high, 1.5694.

Earlier today official data showed that Public Sector Net Borrowing in the United Kingdom, a preferable tool for measuring countrys budget deficit, reached 0.488 billion GBP in July, compared to the budget surplus, registered in July 2012, which was 0.823 billion GBP. Usually July favors higher corporate tax inflows, which leads to surplus on the government budget. However, in July 2013 higher income was completely neutralized by departmental expenditures, which resulted in a deficit for the first time in three years. Preliminary estimates pointed a surplus at the amount of 2.5 billion GBP. Including coupon cash received from the Bank of England on its possessions of gilts, the recorded deficit amounted at 62 million GBP.

The Confederation of British Industry (CBI) said that the index of industrial orders in the UK showed its highest reading since August 2011, standing at 0 in August this year, after the recorded value of -12 in July. Expectations showed an improvement to -8 in August. About 25% of the surveyed companies said that the total number of their industrial orders was above the normal level, while 26% of the companies registered a drop in their orders. Values above 0 are usually an indication that industrial orders will rise, while values below 0 – an indication that orders will decrease.

In addition, the yield on the 10-year UK gilts increased by 0.01 percentage point, to 2.69%, after advancing to 2.75% on August 19th, which was the highest point since August 8th 2011.

In the mean time, later on Wednesday the Federal Reserve Bank will publish the minutes of its meeting on July 30-31st, as it may provide clues whether a reduction of scale of stimulus was coming. The Federal Open Market Committee (FOMC) will hold its next meeting on September 17-18th and will probably consider a pare back of its easing program at that meeting, according to 65% of economists, participated in a survey by Bloomberg News on August 9-13th.

“The pound could be fairly supported ahead of the Fed minutes,” said Josh O’Byrne, a foreign-exchange strategist at Citigroup Inc. in London, cited by Bloomberg. “We suspect they’ll follow on from the more dovish tone set in the statement, highlighting higher mortgage rates and downside risks from low inflation.”

Elsewhere, the sterling was higher against the euro, as EUR/GBP cross dropped by 0.28% to trade at 0.8542 at 11:22 GMT. GBP/JPY pair was also gaining for the day, up by 0.28% to trade at 152.87 at 11:23 GMT. Ultimately, the pound has gained 5.3% over the past six months, the best-performing currency among the 10 developed-nation currencies, tracked by Bloomberg Correlation-Weighted Indexes. The euro has risen 4.1%, while the US dollar has increased its value by 2.3%.