Investing.com - The pound edged lower on Wednesday after the minutes of the Bank of England’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.
GBP/USD briefly popped higher, touching session highs of 1.7003 before pulling back to 1.6944, down from 1.6961 ahead of the minutes.
Cable is likely to find support at 1.6800 and resistance at the more than five year peak of 1.7009 set on Monday.
The minutes showed that the BoE’s monetary policy committee voted unanimously to leave interest rates on hold at their record low of 0.5% this month.
The minutes also showed that the bank was "somewhat surprised" that the financial markets were pricing in a low probability of interest rates rising this year.
Some MPC members believe the question of whether enough spare capacity has been absorbed has become "more balanced" since last month.
The committee was split over how much slack remains in the U.K. labor market, while weak growth in earnings and inflation continued to be a concern.
“On the one hand, output growth had been stronger, and unemployment had fallen faster, than had been anticipated by the MPC and most other forecasters. On the other hand, wage growth and inflation had been weaker,” the minutes said.
The MPC also discussed whether rates should start rising soon, if they will ultimately peak at a level well below their pre-crisis average.
“It could be argued that the more gradual the intended rise in Bank Rate, the earlier it might be necessary to start tightening policy,” the bank said.
Sterling strengthened broadly in recent sessions after BoE Governor Mark Carney said late last week that rates could rise sooner than investors expect. The remarks prompted investors to bring forward expectations for a rate hike to the end of this year from the first quarter of 2015.
Elsewhere, the pound slipped lower against the euro, with EUR/GBP rising 0.19% to 0.8000, recovering from the one-and-a-half year low of 0.7958 struck on Monday.