Forexpros – The euro rose to a three-week high against the pound on Tuesday, as fears over U.S. credit downgrades eased but gains were limited as concerns over the euro zone’s debt crisis weighed after an expensive Spanish bond auction.
EUR/GBP hit 0.8660 during European morning trade, the pair’s highest since October 31; the pair subsequently consolidated at 0.8645, rising 0.24%.
The pair was likely to find support at 0.8596, the low of October 31 and resistance at 0.8685, the high of September 13.
Spain’s Treasury sold EUR2.98 billion in three and six-month bonds in an auction which saw yields rise to 5.2% for the six-month bills, from 3.3% at a similar auction in October.
It was the first Spanish debt auction since the conservative party’s sweeping election victory on Sunday, but investors have remained jittery as plans on how to cut the deficit and restore market confidence have remained unclear.
Market sentiment was boosted earlier, after ratings agency Fitch said that the failure of a U.S. congressional committee to agree on a package of measures to slash the country’s deficit was likely to lead to a revision of the U.S. rating outlook to “negative”, rather than a downgrade.
Also Tuesday, official data showed that U.K. public sector net borrowing fell more-than-expected in October to GBP3.4 billion, from GBP10.2 billion in September.
Analysts had expected U.K. public sector net borrowing to decline to GBP4.3 billion.
Elsewhere, sterling was up against the U.S. dollar with GBP/USD rising 0.13%, to hit 1.5562.
Later in the day, the U.S. was to release preliminary data on gross domestic product, and the U.S. Federal Reserve was to publish the minutes of its November policy meeting, later Tuesday.
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