Investing.com - The pound eased back from four-year highs against the dollar on Monday, as a recent rally prompted investors to take profits, but losses looked likely to remain limited amid expectations that the Bank of England may raise rates next year.
GBP/USD was down 0.19% to 1.6717, after rising to highs of 1.6823 earlier, the strongest level since November 2009.
Cable was likely to find support at 1.6643, Friday’s low and resistance at 1.6823, the session high.
Demand for sterling continued to be underpinned after the BoE raised its U.K. economic growth forecast for 2014 to 3.4% from 2.8% last week, and indicated that it may raise interest rates next year.
In its quarterly inflation report, the bank also updated its forward guidance on bank rates, saying it will not raise rates until the spare capacity in the U.K. economy has been fully absorbed, which it sees happening in 2015.
The dollar remained under pressure after data on Friday showing that U.S. factory output fell unexpectedly in January clouded the outlook for the economic recovery.
Trade volumes were expected to remain thin on Monday, with U.S. markets shut for the President’s Day holiday.
Elsewhere, the euro backed away from more than one-year lows against the pound, with EUR/GBP rising 0.20% to 0.8191 after falling as low as 0.8158 earlier, the weakest level since January 2013.
The euro continued to remain supported after Friday’s better-than-expected euro zone fourth quarter growth data eased concerns that the European Central Bank could tighten monetary policy at its next meeting.
Also supporting the euro, ECB governing council member Ewald Nowotny said Monday the banks bond buying program is “not that relevant” anymore, because of the improved economic situation.