Forexpros – The pound extended losses against the U.S. dollar on Monday, falling to a five-week low as risk aversion mounted after talks on reducing the U.S. deficit failed and concerns over sovereign debt contagion in the euro zone continued to weigh.
GBP/USD hit 1.5634 during European afternoon trade, the pair’s lowest since October 18; the pair subsequently consolidated at 1.5649, tumbling 0.98%.
Cable was likely to find short-term support at 1.5631, the low of October 18 and resistance at 1.5797, the days high.
The failure of a U.S. congressional “super committee” to agree on a package of measures to slash USD1.2 trillion off the U.S. deficit over the next 10 years sparked fresh selling in riskier assets.
Meanwhile, in the euro zone the spread between 10-year Spanish bond yields and their German counterparts widened as investors remained jittery despite the election of a new Spanish government which was expected to push through drastic austerity measures.
Also Monday, rating agency Moody’s said a rise in French government debt yields and weaker growth prospects could be negative for the outlook on the country’s credit rating.
The pound was also weighed by concerns over fresh monetary easing measures after a senior Bank of England policymaker said last week that there was a “very strong case” for extending the central bank’s asset purchase program next year.
The pound was also down against the euro, with EUR/GBP rising 0.47% to hit 0.8598.
Later in the day, the U.S. was to publish industry data on existing home sales.
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