Forexpros – The euro extended losses against the pound on Wednesday, falling to a five-week low as Italian borrowing costs surged to the 7% threshold that precipitated bailouts in Greece, Ireland and Portugal.
EUR/GBP hit 0.8542 during European morning trade, the pair’s lowest since October 4; the pair subsequently consolidated at 0.8548, shedding 0.56%.
The pair was likely to find short-term support at 0.8528, the low of September 12 and a six-month low and resistance at 0.8598, the days high.
The euro weakened broadly after a Paris based clearing house hiked the margin call on Italian bonds, fuelling concerns over the country’s fiscal crisis.
The yield on Italian 10-year bonds surged to a record high of 7.03%, amid uncertainty over whether Italy’s new government will be able to shore up growth and implement austerity measures, after Prime Minister Silvio Berlusconi announced that he would step down next week.
In the U.K., official data showed that the trade deficit widened unexpectedly in September, increasing to GBP9.8 billion, the largest deficit on record, compared to a deficit of GBP8.6 billion in August.
Economists had expected the trade deficit to contract to GBP8.0 billion.
The euro was also sharply lower against the U.S. dollar, with EUR/USD tumbling 1.05% to hit 1.3687.
Also Wednesday, officials in Greece were scrambling to name a new prime minister, as efforts continued to avert an imminent default by implementing a new bailout program.
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