Pound Trades Higher Amid Risk Appetite

The pound traded higher against its major counterparts in the early European session on Wednesday amid risk appetite, as oil prices recovered and investors awaited the U.S. Federal Reserve's interest rate decision later in the day on hopes of an increase in benchmark rate.

Although a 25 basis-point rate hike is priced in, traders await the Fed statement for further clarity on the bank's interest rate plans for the rest the year.

The Fed Chairwoman Janet Yellen will hold a press conference at 2:30 pm ET, when she will give an update on the U.S. economy.

Oil prices rallied on industry data showing a surprise drawdown in U.S. crude stockpiles. The American Petroleum Institute reported a decline in crude inventories by 531,000 barrels of oil per day to 529.1 million barrels of oil per day in the week to March 10, defying analysts' expectations for an increase of 3.7 million barrels of oil per day.

In economic front, data from the Office for National Statistics showed that the UK jobless rate fell to the lowest level since 1975 at the start of the year.

The ILO unemployment rate came in at 4.7 percent in three months to January versus 5.1 percent seen a year earlier. It has not been lower since June to August 1975. The expected rate was 4.8 percent.

At the same time, the employment rate was 74.6 percent, the joint highest since comparable records began in 1971.

The Bank of England's monetary policy announcement is due on Thursday, with economists expecting no major changes in policy despite a recent upshot in inflation.

The pound has been trading slightly higher against its major counterparts in the Asian session.

The pound spiked up to a 2-day high of 1.2359 against the Swiss franc and held steady in the course of the trading session. The pound-franc pair is likely to challenge resistance resistance around the 1.28 zone.

The pound firmed to near a 2-week high of 140.60 against the yen and held steady since then. If the pound extends advance, 142.00 is possibly seen as its next resistance level.

Figures from the Ministry of Economy, Trade and Industry showed that Japan's industrial production declined less than initially estimated in January.

Industrial production fell 0.4 percent month-over-month in January instead of a 0.8 percent drop estimated earlier. It was the first decline in six months.

The pound strengthened to a 9-day high of 1.2255 against the greenback and a 6-day high of 0.8664 against the euro, compared to Tuesday's closing values of 1.2153 and 0.8724, respectively. The pound moved sideways against these currencies in subsequent part of the deals. On the upside, 1.24 and 0.85 are possibly seen as the next resistance levels for the pound against the greenback and the euro, respectively.

Looking ahead, New York Fed's empire manufacturing data for March, U.S. consumer price index and retail sales for February, NAHB housing market index for March and business inventories for January, as well as Canada existing home sales for February are due in the New York session.