Forexpros – The pound extended gains against the U.S. dollar on Tuesday, rising to a one-week high after a well-received auction of Italian government debt but markets remained cautious ahead of the U.K. government’s autumn budget statement.
GBP/USD hit 1.5656 during European morning trade, the pair’s highest since November 22; the pair subsequently consolidated at 1.5622, gaining 0.69%.
The pair was likely to find support at 1.5468, the daily low and resistance at 1.5797, the high of November 21.
Italy’s Treasury auctioned EUR7.5 billion of debt but borrowing costs surged to euro-era highs. The yield on new three-year bond was 7.89% and 10-year yields climbed to 7.56% from 6.06% at a similar auction last month.
Market sentiment found support as Italian bond yields came off the highs they hit ahead of the auction, with the two-year yield easing back below the 7% threshold.
In the U.K., investors were waiting for the government’s autumn budget statement, which was expected to revise down the forecast for U.K. growth significantly, amidst signs that the economic recovery is faltering.
Earlier in the day, the Bank of England said net lending to individuals rose by GBP1.3 billion in October, above expectations for GBP1.0 billion.
The report also showed that the number of final mortgage approvals rose to their highest level since December 2009 in October, climbing to 53,000 from 51,000 the previous month.
The data came after U.K. mortgage lender Nationwide said house prices rose unexpectedly this month, climbing 0.4%, confounding expectations for a decline of 0.1%.
However the data was unlikely to boost expectations for a recovery in the housing sector, given the overall weakness in the economic outlook.
Elsewhere, sterling was also up against the euro with EUR/GBP shedding 0.25%, to hit 0.8564.
Euro zone finance ministers were to meet later in the day and were expected to approve plans to enlarge the scope of the region’s bailout fund, the European Financial Stability Facility. They were also expected to sign off on Greece’s next tranche of financial aid.
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