Investing.com - The pound traded steady to higher against the dollar on Wednesday, largely in standby mode as investors remained on the sidelines to await the release of U.S. retail sales data on Thursday.
The pound came off earlier lows sustained on Tuesday after Bank of England Governor Mark Carney said he saw room for the monetary authority to leave rates on hold for longer.
In U.S. trading on Wednesday, GBP/USD was trading at 1.6622, up 0.03%, up from a session low of 1.6568 and off a high of 1.6636.
Cable was likely to find support at 1.6383, the low from Feb. 10, and resistance at 1.6742, Monday's high.
Investors remained cautious amid ongoing worries over the health of China’s economy after weekend data showed that exports dropped 18.1% in February and inflation slowed.
Uncertainty over China's slumping exports reflected weak demand in the U.S. due to rough winter weather softened the greenback slightly, as investors awaited the release of retail sales data on Thursday.
Markets were also eyeing the standoff between Russia and the West over Ukraine. Ukraine’s interim Prime Minister Arseniy Yatsenyuk was to travel to the U.S. to meet President Barack Obama on Wednesday, as diplomatic efforts to resolve the crisis continued.
The pound saw headwinds of its own.
Speaking before parliament’s Treasury Select Committee on Tuesday, Carney said the amount of spare capacity in the economy was probably slightly higher than 1.5% of gross domestic product, indicating that the economic recovery can continue without pushing up inflation.
He added that there was a range of views among the bank’s monetary policy committee members on the amount of spare capacity in the economy.
Carney also reiterated that when rate increases do come they will be gradual.
His comments weakened the pound though bottom fishers brought the currency back up on Wednesday.
Sterling was down against the euro, with EUR/GBP up 0.32% at 0.8369, and down against the yen, with GBP/JPY down 0.26% as 170.73.
The euro firmed after ECB executive board member Benoit Coeure said the monetary authority saw no indications of deflation in the euro area, though the risk of softer prices remains a possibility.
"We don't see deflation in the euro zone. We see it as a possible risk, and we have to be ready to act against the risk if it materializes," he said, and his comments firmed the euro by allaying expectations the ECB remains poised to cut rates or roll out fresh stimulus measures.
On Thursday, the U.S. is to release data on retail sales and import prices, in addition to the weekly government report on initial jobless claims.