Forexpros – The pound erased losses against the U.S. dollar on Thursday, tracking the euro higher after an auction of Spanish government debt encountered better-than-expected investor demand, supporting risk appetite.
GBP/USD pulled back from 1.5638, the daily low, to hit 1.5725 during European early afternoon trade, rising 0.15%.
Cable was likely to find support at 1.5525, Wednesday’s low and short-term resistance at 1.5779, Wednesday’s high and a seven-day high.
Spain’s Treasury auctioned the full targeted amount of EUR3.75 billion of government bonds, with yields staying below the critical 7% threshold. The average yield on Spain’s five-year bonds was 5.54%, compared with 4.84% in early November.
Meanwhile, France auctioned EUR4.5 billion of debt, including EUR1.57 billion of 10-year bonds at an average yield of 3.18%, down from 3.22% at a similar auction last month.
But the pound remained vulnerable after a report earlier showed that manufacturing activity in the U.K. contracted for a second successive month in November.
Markit said that its U.K. manufacturing purchasing managers’ index fell to 47.6, shrinking at the fastest pace since June 2009, following a reading of 47.8 in October. Analysts had expected the manufacturing PMI to decline to 47.0 in November.
Market sentiment was dented earlier after European Central Bank President Mario Draghi said that downside risks to Europe’s economic outlook have increased.
The pound was lower against the euro, with EUR/GBP rising 0.13% to hit 0.8576.
Later in the day, the U.S. was to release its weekly report on initial jobless claims, while the Institute of Supply Management was to release data on manufacturing activity.
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