Investing.com - The pound rose to more than five year highs against the broadly weaker dollar on Thursday, shrugging off a decline in U.K. retail sales last month, after the Federal Reserve indicated that rates are likely to remain on hold for some time.
GBP/USD touched highs of 1.7026, the most since August 2009, and was last at 1.7017, up 0.15%.
Cable was likely to find support at 1.6950 and resistance at 1.7040.
The dollar weakened broadly after the Fed gave no indication of when interest rates could start to rise at the conclusion of its two-day meeting on Wednesday. In addition, the Fed’s forecast of where interest rates might reach in the long term fell from 4% to 3.75%.
The central bank cut its bond purchases by $10 billion a month, to $35 billion, saying there was "sufficient underlying strength" in the U.S. economy to continue tapering.
The central bank acknowledged the recent increases in inflation and drop in unemployment, but still lowered its forecast for growth this year due to "unexpected contractions" in the first quarter as a result of the unusually harsh winter.
The pound shrugged off data showing that U.K. retail sales fell in May, declining for the first time since January.
The Office for National Statistics said retail sales fell 0.5% last month, in line with forecasts. Retail sales rose at an annualized rate of 3.9% in May, the ONS said, below expectations for a 4.3% gain.
Demand for sterling continued to be underpinned by expectations that the Bank of England will raise interest rates ahead of other central banks.
Markets brought forward expectations for a U.K. rate hike after BoE Governor Mark Carney said late last week that rates could rise sooner than investors expect.
Wednesday’s minutes of the BoE’s June meeting showed that while the case for a rate increase is becoming more balanced more slack still needs to be absorbed from the economy.
Elsewhere, sterling was slightly lower against the firmer euro, with EUR/GBP rising 0.15% to 0.8012.