Forexpros – The pound was down more than 1% against the U.S. dollar on Wednesday, as concerns over the debt crisis in the euro zone intensified after Italian borrowing costs rose above 7%, a level seen widely as unsustainable.
GBP/USD hit 1.5911 during U.S. morning trade, the pair’s lowest since November 3; the pair subsequently consolidated at 1.5931, falling 1.01%.
Cable was likely to find support at 1.5979, the low of November 4 and short-term resistance at 1.6129, Tuesday’s high.
The dollar strengthened against all of its major counterparts after the yield on two-year and 10-year Italian government bonds climbed above the 7% threshold which prompted Greece, Ireland, and Portugal to seek international bailouts, after a Paris based clearing house hiked the margin call on Italian bonds.
The move came after Italian Prime Minister Silvio Berlusconi announced late Tuesday that he would step down after parliament approves next year’s budget, but uncertainty remained over whether Italy’s new government will be able to shore up growth and implement austerity measures.
Meanwhile, officials in Greece were scrambling to name a new prime minister, as efforts continued to avert an imminent default by implementing a new bailout program.
Elsewhere, the pound was sharply higher against the euro, with EUR/GBP tumbling 0.99% to hit 0.8510.
Also Wednesday, official data showed that the U.K. trade deficit widened unexpectedly in September, increasing to GBP9.8 billion, the largest deficit on record, compared to a deficit of GBP8.6 billion in August.
Economists had expected the trade deficit to contract to GBP8.0 billion in September.
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