Forexpros – The euro was steady against the pound on Tuesday, after an auction of Spanish government bonds saw short-term borrowing costs hit a six-moth high, pressured higher by sustained concerns over the country’s fragile banking sector.
EUR/GBP hit 0.8006 during European morning trade, the session high; the pair subsequently consolidated at 0.8000, inching up 0.04%.
The pair was likely to find support at 0.7949, the low of May 16 and a three-and-a-half year low and resistance at 0.8036, Monday’s high.
Spain’s Treasury auctioned EUR8.5 billion of six-month bonds at an average yield of 2.10%, the highest level since December 2011 and up from 1.77% at a similar auction last month.
The yield on Spanish 10-year bonds rose to 6.48% following the auction, hovering just below the 2012 high of 6.50% hit Monday after the government announced that it was to recapitalize one of the country’s largest commercial lenders.
The announcement sparked fears that the increasing cost of bank rescues could force Madrid to seek an international bailout.
Investor sentiment remained somewhat supported by speculation that China may soon launch an economic stimulus program, to counter signs of a slowdown in growth in the world’s second largest economy.
The euro was marginally higher against the U.S. dollar and the yen, with EUR/USD up 0.08% to hit 1.2551 and EUR/JPY up 0.11% to trade at 99.77.
Later in the day, Germany was to release preliminary data on consumer price inflation, while the U.S. was to release reports on house price inflation and consumer confidence.
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