Forexpros – The euro remained fractionally lower against the pound on Monday, after Italy saw 10-year bond yields drop below 6% at an action of government debt, while expectations mounted for fresh action from the European Central Bank to stem the euro zone’s debt crisis.
EUR/GBP hit 0.7812 during European morning trade, the session low; the pair subsequently consolidated at 0.7816, inching down 0.06%.
The pair was likely to find near-term support at 0.7799, Friday’s low and resistance at 0.7859, last Thursday’s high.
Earlier in the day, Italy sold EUR2.49 billion of 10-year bonds at an average yield of 5.96%, down from 6.19% last month and the lowest level since April, indicating that investors now see Italian government debt as a somewhat safer investment.
Italian and Spanish borrowing costs have eased back from highs hit last week after ECB President Mario Draghi pledged Thursday to do whatever is necessary to preserve the single currency.
The remarks fuelled expectations that the ECB is set to announce fresh policy measures to tackle the long running crisis following its policy meeting on Thursday, despite a lack of concrete details.
Meanwhile, sentiment on sterling remained fragile after official data last week showed that the U.K. economy contracted significantly more-than-expected in the three months to June, extending the U.K. recession into a third quarter.
On Friday, ratings agency Standard and Poor’s confirmed that U.K. will retain its triple-A credit rating despite recent economic weakness, saying it expected the economy to begin to recover in the second half of 2012.
However, S&P warned that if the economy failed to grow the U.K.’s sovereign rating could be downgraded.
The Bank of England was not widely expected to announce any changes to monetary policy at its meeting on Thursday.
Investors were also looking ahead to the outcome of the Federal Reserve’s policy setting meeting on Wednesday, amid speculation over whether the bank will hint at further easing measures.
The euro was lower against the U.S. dollar and the yen, as investors sold the currency to lock in gains following last week’s three-day rally, with EUR/USD down 0.47% to 1.2263 and EUR/JPY dropping 0.76% to 95.91.
Later Monday, U.S. Treasury Secretary Timothy Geithner was to meet with German Finance Minister Wolfgang Schaeuble and Mario Draghi to discuss the European, U.S. and global economies.
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