Forexpros – The euro was almost unchanged against the pound in thin post-holiday trade on Wednesday, after a well-received Italian bond auction showed a sharp drop in yields.
EUR/GBP hit 0.8348 during European morning trade, the daily high; the pair subsequently consolidated at 0.8341, easing up 0.02%.
The pair was likely to find support at 0.8314, the low of December 23 and resistance at 0.8372, the previous day’s high.
With most investors already away on year-end leave, trading volumes were thin, resulting in tight liquidity conditions and irregular volatility.
The euro found support after a stronger-than-expected auction of Italian government debt earlier in the day.
Italy’s Treasury sold EUR9 billion of six-month bills, at an average yield of 3.25%, down from a record-high 6.50% in a previous auction in November. The country also sold EUR1.73 billion of two-year zero-coupons at a 5% yield.
Bids exceeded supply 1.7 times, up from 1.5 times in November.
Following the auction, the yield on Italy’s 10-year bonds traded at 6.76%, falling below the 7% threshold widely seen as unsustainable in the long-term.
The response to the auction was viewed as a gauge of whether last week’s cash infusion by the European Central Bank had been effective.
Despite the upbeat results, Thursday’s sale of EUR8.5 billion of long-term Italian debt maturing between 2014 and 2022 was seen as a bigger test of market confidence in the country’s sovereign debt.
Elsewhere, the euro was flat against the U.S. dollar in thin trade, with EUR/USD trading at 1.3072.
There are no major economic data due for release Wednesday.
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