Investing.com -- GBP/USD fell slightly on Wednesday, erasing some of its sharp gains from the previous session, as foreign exchange traders look ahead to a highly-anticipated Bank of England meeting, where policymakers may lower interest rates for the first time since 2009.
The currency pair wavered between 1.3281 and 1.3372, before closing the U.S. afternoon session at 1.3325, down 0.24% on the day. It came one session after the Pound surged more than 1.3% against the U.S. Dollar amid continuing fallout from last week's release of soft U.S. GDP growth figures for the second quarter. Despite the Pound Sterling's rebound against the Dollar in recent weeks, the British currency is still down by more than 10% against the greenback since the U.K.'s historic decision to leave the European Union on June 24.
GBP/USD likely gained support at 1.2968, the low from July 12 and was met with resistance at 1.3481, the high from July 15.
On Thursday morning, the Bank of England is largely expected to slash its benchmark interest rate to a record-low of 0.25%, following a string of soft economic data in the weeks since June's historic Brexit decision. Hours later, BOE governor Mark Carney sent strong hints that the bank could reduce rates and introduce further easing measures at some point over the summer in order to help avert a significant economic downturn. Historically, interest rate cuts from the BOE have been associated with a sharp depreciation in the Pound.
At the Bank of England's July MPC meeting, the committee voted 8-1 to hold rates steady at a level of 0.50%.
Following the Bank of England's rate decision, market players will turn their attention to a closely-watched U.S. employment report for the month of July on Friday for a clearer picture on the state of the U.S. labor market. Ahead of the report, payroll solutions firm ADP said in its monthly National Employment report that the economy added 179,000 nonfarm payroll positions in July, above consensus estimates of 165,000. On Tuesday, Federal Reserve Bank of Atlanta president Dennis Lockhart said he will closely watch the next two monthly employment reports before the Fed meets again in September. In addition, Chicago Fed president Charles Evans told reporters that one rate hike this year could be appropriate if inflation continues to move closer to the Federal Reserve's 2% target.
Any rate hikes by the Fed this year are viewed as bullish for the dollar, as foreign investors pile into the greenback in order to capitalize on higher yields.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose by more than 0.40% to an intraday high 95.35, bouncing off five-week lows. On Tuesday, the index slipped below 95 for the first time since June 24. Before Wednesday's rebound, the Dollar had fallen sharply since hitting four-month highs at 97.62 early last week.