Investing.com - The pound rose against the dollar on Tuesday after Federal Reserve Chair Janet Yellen told Congress that monetary policy will stay the course though the labor market must improve, which markets interpreted as a sign the Fed will go slowly when tapering stimulus programs.
In U.S. trading on Tuesday, GBP/USD was trading at 1.6447, up 0.28%, up from a session low of 1.6393 and off a high of 1.6487.
Cable was likely to find support at 1.6383, Monday''s low, and resistance at 1.6626, the high from Jan. 28.
In prepared remarks to the House Financial Services Committee, Fed Chair Yellen suggested that the central bank would taper the pace of its asset purchases at future meetings if the economy continued to improve as expected.
“Let me emphasize that I expect a great deal of continuity in the Federal Open Market Committee’s approach to monetary policy,” she said.
Yellen added that the pace of the central bank’s bond purchases are not on a “preset course” and reiterated that the Fed plans to hold interest rates near zero “well past” the time the jobless rate falls below 6.5%.
Keeping the dollar weak, however, were Yellen''s observations that "the recovery in the labor market is far from complete" despite progress seen over the last year, describing the country''s 6.6% unemployment rate as "well above levels" that Fed officials consider sustainable in a healthy economy.
The Fed is currently purchasing USD65 billion in Treasury holdings and mortgage debt a month to suppress interest rates to spur recovery, and Yellen''s words, while in line with market expectations, kept expectations firm that monetary authorities will trim asset purchases on a gradual basis, while tightening remains far off on the horizon.
Sterling was up against the euro, with EUR/GBP down 0.25% to 0.8294, and up against the yen, with GBP/JPY up 0.63% as 168.78.