The sterling pound reversed sharply to the downside against the low yielding U.S. dollar, cutting some of the gains recorded in the past week after the downbeat growth figures from the United Kingdom, where the pound fell on pessimism the royal economy slipped back into a technical recession after posting two quarters of contraction.

The Office for National Statistics announced today that the United Kingdom contracted in the first quarter of 2012 by 0.2%, extending the previous contraction of 0.3% seen in the fourth quarter of 2011, adding pressures on the British Government led by the Premier David Cameron.

The economic conditions seem to be worsening in the United Kingdom, where policy makers are not able to provide more stimulus as inflation remained above the target and also above forecasts, weighing sharply on households income and in result on spending, the thing that pressured growth further as well.

The Sterling pound is currently trading around $1.6093 versus the U.S. dollar, compared with the opening level of 1.6143. The GBP/USD pair recorded the highest at $1.6170 and the lowest at $1.6080.

However, other high yielding currencies such as the euro remained biased to the upside against the U.S. dollar, ahead of the Federal Open Market Committee (FOMC) rate decision where all eyes are focused on the world's largest economy as the economy will release the closely watched durable goods report for details over the spending in U.S.

Furthermore, markets will concentrate on the FOMC economic projections and FOMC press conference, noting that any hints for further easing might sent the U.S. dollar south, supporting markets in general to rebound.

The EUR/USD pair extending the gains recorded earlier in the past session, hovering currently around $1.3226 after recording the highest at $1.3236 and the lowest at $1.3185, noting that the pair started the session at $1.3196 today.

The U.S. dollar index (USDIX) remained weak ahead of the critical events awaited, where the dollar continued the declined seen yesterday reaching a low of 79.04. The dollar started the session at 79.19 and reached a high of 79.26 so far.