GBP/USD Lower Ahead of BOE Rate Decision

The dollar traded little changed versus its rivals Wednesday. The Federal Reserve's Beige Book stated that the US economy weakened across all regions as credit conditions worsened since mid-October. Service industries in the United States and Europe contracted at record rates in November, deepening the global recession. US equity markets closed a volatile trading sharply higher, but the yen was little changed. The euro traded in a narrow range before Thursday's European Central Bank interest-rate decision. Weaker-thanexpected European retail sales and service PMI will pressure the ECB to cut interest rates substantially tomorrow. The Australian dollar gained slightly and the Canadian dollar declined as the Canadian political crisis worsened.

The GBP/USD fell after reports showed UK services contracted at the fastest pace in at least 12 years, inducing the Bank of England to cut interest rates tomorrow. The pair is likely to test the 1.45-area support on the rate cut. If the support is broken, sterling may decline substantially again.