Forex - GBP/USD close to 6-month lows after BoE

The pound was hovering close to six-month lows against the dollar on Wednesday, after the Bank of England said inflation would remain above target until early 2016.

GBP/USD hit 1.5534 during European afternoon trade, the pair’s lowest since August 3; the pair subsequently consolidated at 1.5549, dropping 0.71%.

Cable was likely to find support at 1.5457 and resistance at 1.5688, the session high.

The pound hit session lows against the dollar after the BoE said inflation is likely to be at around 2.3% in two years’ time, sharply higher than the 1.8% forecast in November, before falling back below the bank’s 2% target in the first quarter of 2016.

The central bank said the economy will experience a "slow but sustained recovery" over the next three years, saying economic growth was likely to remain below its pre-crisis levels until 2015 and that it stood ready to provide more stimulus as needed.

The bank said it expects a slight rise in gross domestic product in the first quarter of this year, with annual GDP growth of around 1.9% in two years’ time.

The pound found some support after a G7 official said that Tuesday’s statement on exchange rates was aimed at indicating concerns over the speed of the yen’s recent depreciation rather than the currency’s current levels.

The G7 statement reaffirmed a commitment to market-determined exchange rates and said that fiscal and monetary policy won't target exchange rates.

Elsewhere, sterling was sharply lower against the euro, with EUR/GBPsurging 0.88% to 0.8662.

The euro found support after official data showed that industrial production in the euro zone rose 0.7% in December, beating expectations for a 0.2% increase, while production in Germany, the region’s largest economy, rose 0.8% after falling for the four previous consecutive months, adding to signs of a recovery in the bloc.

The U.S. was to release official data on retail sales later in the trading day.