Forexpros – The pound tumbled to a three-day low against the U.S. dollar on Wednesday, after Italian borrowing costs surged to euro-era highs, adding to concerns over the country’s financial woes.
GBP/USD hit 1.5956 during late European morning trade, the pair’s lowest since November 4; the pair subsequently consolidated at 1.5958, dropping 0.80%.
The pair was likely to find support at 1.5875, the low of November 3 and resistance at 1.6165, the high of October 31.
The pound came under pressure after Paris-based clearing house hiked the margin call on Italian bonds, sending the yield on Italian ten-year bonds to more than 7%, a level widely seen as unsustainable.
Markets were jittery amid uncertainty over the ability of Italy’s new government to implement austerity measures and shore up the economy, after Prime Minister Silvio Berlusconi announced late Tuesday that he would step down next week.
Meanwhile, Greek officials were scrambling unsuccessfully to find a new prime minister to lead the future coalition government.
In the U.K., official data showed that the 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.
Analysts had expected the trade deficit to contract to GBP8.0 billion.
Elsewhere, the pound was sharply higher against the euro with EUR/GBP declining 0.64%, to hit 0.8543.
Earlier Wednesday, government data showed that China’s annualized rate of consumer price inflation came in broadly in line with expectations in October, slowing to 5.5%, after a 6.1% the previous month, easing fears over monetary tightening by Beijing.
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