Forexpros – The pound erased gains against the U.S. dollar on Thursday, after comments by German Chancellor Angel Merkel added to concerns over the deepening debt crisis in the euro zone.
GBP/USD retreated from 1.5567, the daily high, to hit 1.5517 during European late afternoon trade, slipping 0.04%.
Cable was likely to find short-term support at 1.5494, Wednesday’s low and a seven-week low and resistance at 1.5655, Wednesday’s high.
Speaking at a joint news conference with France’s Nicolas Sarkozy and Italy’s Mario Monti following a meeting earlier, Merkel reiterated her belief that joint euro zone bonds would remove incentives for individual states to improve their fiscal discipline.
The remarks fanned fears that European leaders will not be able to agree on a solution to the region’s debt crisis.
Also Thursday, ratings agency Fitch downgraded Portugal’s sovereign rating to junk status, saying it expects gross domestic product to contract by 3% in 2012, making the government’s deficit reduction plan far more challenging to execute.
Market sentiment improved somewhat during early trade after a report showed that German business confidence improved unexpectedly this month, indicating that the euro zone’s largest economy is coping with the debt crisis better than experts had feared.
In the U.K., revised data showed that gross domestic product expanded by 0.5% in the third quarter and was up 0.5% on the year, in line with initial estimates earlier this month and with economists’ forecasts.
The pound was almost unchanged against the euro, with EUR/GBP dipping 0.01% to hit 0.8592.
Meanwhile, trade looked likely to remain subdued with markets in the U.S. closed for the Thanksgiving holidays.
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