Investing.com -- GBP/USD bounced off three-month lows as widespread Brexit fears eased and investors reacted to continued inaction from top central banks around the world.
The currency pair traded in a broad range between 1.4013 and 1.4254 before settling at 1.4207, up 0.09% on the session. Since eclipsing 1.45 last week, the Pound Sterling has tumbled more than 2.3% against the dollar. The pound remains close to falling to near one-year lows of 1.3833 in late-February. The pair last fell below 1.40 in early-March.
GBP/USD likely gained support at 1.3852, the low from Feb. 26 and was met with resistance at 1.4693, the high from May 27.
As investors continued to digest a relatively dovish monetary policy statement from the Federal Reserve, the Bank of England (BOE) followed suit by maintaining its bank rate at 0.5% and holding the level of purchased assets financed by the issuance of central bank reserves at £375 billion. Notably, the BOE issued stark warnings on the ramifications that could ensue from a "Leave," vote in next week's controversial Brexit referendum.
"The outcome of the referendum continues to be the largest immediate risk facing UK financial markets, and possibly also global financial markets," the Bank of England said in a statement. "While consumer spending has been solid, there is growing evidence that uncertainty about the referendum is leading to delays to major economic decisions that are costly to reverse, including commercial and residential real estate transactions, car purchases, and business investment."
The BOE's comments pushed the implied volatility on the British Pound to near record-highs on Thursday. Foreign Exchange traders also reacted to news that British MP Jo Cox passed away after she was shot and stabbed by an attacker in West Yorkshire. News of the tragedy raised speculation that the Brexit referendum could be delayed. Some concerns of a U.K. departure, however, were assuaged after betting odds from the U.K. sportsbook Betfair indicated that there is a 65% chance the "Remain" vote will prevail next week.
On Wednesday, the Federal Open Market Committee (FOMC) left the target range on its benchmark Federal Funds Rate unchanged at a level between 0.25% and 0.50%. It marked the fourth consecutive meeting the FOMC held short-term interest rates steady. The FOMC left its 2016 rate outlook unchanged at 0.9%, while downgrading its forecast for each of the next two years. In addition, six members of the FOMC recommended one interest rate hike before the end of this year, up from one in March. By comparison, the FOMC estimated that it would raise interest rates four times this year in its long-term forecasts last December.
Any rate hikes by the Fed this year are viewed as bullish for the dollar, as 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, soared more than 0.50% to an intraday-high of 95.53, before falling back to 94.77 at the close of U.S. afternoon trading. The index is still down by more than 5% since early-December.
Yields on the U.S. 10-Year fell to an intraday low of 1.518%, their lowest level in four years, before settling at 1.579%. Also in the euro area, yields on the Switzerland 30-Year fell into negative territory for the first time on record.