Forexpros – The pound edged higher against the U.S. dollar on Tuesday, but gains looked likely to remain limited as concerns over the deepening debt crisis in the euro zone weighed on market sentiment.
GBP/USD hit 1.5536 during European afternoon trade, the session high; the pair subsequently consolidated at 1.5530, gaining 0.16%.
Cable was likely to find support at 1.5412, the low of July 13 and resistance at 1.5623, Monday’s high.
Sterling found support following a report showing that China’s HSBC manufacturing purchasing managers index improved to 49.5 in July, its highest level since February, from a final reading of 48.2 in June.
While the index remained below the 50 level which indicates contraction, the improvement from the previous month eased concerns over a slowdown in the world’s second largest economy.
The report offset weak data out of the euro zone, showing that that manufacturing activity in Germany slowed to the lowest level in more than three years in July, just one day after rating’s agency Moody’s cut its outlook on Germany to negative from stable.
Separate reports showed that manufacturing activity in the euro zone contracted at the fastest pace since May 2009 in July, while the French manufacturing sector contracted at the fastest pace in 38 months.
Meanwhile, investors remained fearful that Spain will be the next country in the euro zone to require a full-scale bailout after the yield on Spanish 10-year bonds rose to a euro-era high of 7.60%, well above the 7% threshold considered unsustainable if a country is to remain solvent.
The pound was within striking distance of a three-and-a-half year low against the euro, with EUR/GBP down 0.38% to 0.7784.
Later in the day, the U.S. was to release preliminary data on manufacturing activity, while Federal Reserve Chairman Ben Bernanke was to speak.
Forexpros
