Forexpros – The pound erased losses against the U.S. dollar on Monday, bouncing off a two-day low as risk sentiment strengthened after dovish comments by Federal Reserve Chairman Ben Bernanke and amid reports Germany may agree to combine the euro zone’s two bailout funds.
GBP/USD eased off 1.5801 during European afternoon trade, the pair’s lowest since March 22; the pair subsequently consolidated at 1.5914, rising 0.28%.
Cable was likely to find support at 1.5785, the low of March 5 and resistance at 1.5965, the high of March 2.
The greenback came under pressure after Fed Chairman Ben Bernanke said in a speech that further monetary accommodation is needed to bring about big gains in the U.S. jobs market, which he described as “far from normal”.
Meanwhile, market sentiment was boosted by reports that German Chancellor Angela Merkel and Finance Minister Wolfgang Sch?uble will support an initiative to combine the region’s two bailout funds, the European Financial Stability Fund and the European Stability Mechanism.
Euro zone finance ministers are to meet on Friday to discuss enlarging the region’s financial firewall by combining the EUR440 billion EFSF and the EUR500 billion ESM to give a total fund of EUR700 billion to fight the debt crisis.
The pound fell to a two-day low against the dollar earlier after Italian Prime Minister Mario Monti warned over the weekend that the threat of contagion from Spain could cause the debt crisis in the euro zone to flare up again.
Elsewhere, sterling was fractionally lower against the euro with EUR/GBP edging 0.04% higher, to hit 0.8365.
Later in the day, the U.S. was to publish industry data on pending home sales.
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