Forexpros – The pound extended losses against the U.S. dollar on Tuesday, falling to a fresh session low as Italian borrowing costs surged to record highs after a government bond auction, weighing on demand for riskier assets.
GBP/USD hit 1.5906 during U.S. morning trade, the daily low; the pair subsequently consolidated at 1.5911, dropping 0.94%.
The pair was likely to find support at 1.5753, the low of October 21 and resistance at 1.6119, the high of November 9.
The pound continued to fall, tracking the euro’s losses after Italy’s Treasury raised the maximum targeted amount of EUR3 billion at the sale, but yields on the five-year bonds rose to a euro-era high of 6.29%, up from 5.32% at a similar auction a month ago.
Over the weekend, Italy’s President Giorgio Napolitano appointed former European Commissioner Mario Monti to head a new government as the country attempts to implement austerity measures while simultaneously shoring up economic growth.
Earlier Monday, official data showed that industrial output in the euro zone fell at the fastest pace in two-and-a-half years in September, dropping 2%, slightly less than expectations for a 2.2% decline, but erasing all of the previous month’s 1.4% gain.
The weak data underlined concerns over the threat of an economic downturn in the single currency bloc.
Elsewhere, the pound was fractionally lower against the euro with EUR/GBP easing up 0.04%, to trade at 0.8563.
Also Monday, German Chancellor Angela Merkel said the debt crisis in the euro zone had brought about the continent’s “toughest hour since World War II”.
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