Forexpros — The pound slumped to a three-day low against the U.S. dollar on Monday, as risk appetite weakened amid ongoing concerns over a potential U.S. sovereign debt default and lingering fears over the euro zone’s debt crisis.
GBP/USD hit 1.6066 during European morning trade, the pair’s lowest since July 13; the pair subsequently consolidated at 1.6084, declining 0.31%.
Cable was likely to find support at 1.5904, the low of July 13 and resistance at 1.6175, Friday’s high.
U.S. President Barack Obama said over the weekend that the U.S. government was “running out of time” in regards to negotiations over lifting the country’s USD14.3 trillion debt ceiling before an August 2 deadline.
Former U.S. Treasury Secretary Larry Summers said that a U.S. debt default would cause panic throughout the financial system and long-term uncertainty.
Ratings agencies Moody’s and Standard & Poor’s both warned last week that a failure to raise the debt limit in time would result in a downgrade in the credit rating of the world’s largest economy.
Meanwhile, Euro zone finance ministers were to meet Thursday to focus on “the financial stability of the euro area as a whole and the future financing of the Greek program,” according to the president of the European Council, Herman Van Rompuy.
The European Banking Authority said Friday that eight banks out of the region’s 90 top lenders failed its stress tests, with a combined capital shortfall of EUR2.5 billion.
The EBA said 16 banks narrowly passed the stress tests. Of the banks that failed the tests, five were in Spain, two in Greece and one in Austria, while all banks tested in the U.K. and Ireland passed.
While the results were better-than-expected, the tests did not include the possibility of a sovereign debt default, which many believe was a likely outcome for Greece.
Elsewhere, the pound was higher against the euro, with EUR/GBP down 0.45% to hit a six-week low of 0.8735.
Later in the day, the U.S. was to publish a government report on the balance of domestic and foreign investments.
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