Forexpros – The pound fell to a four-month low against the U.S. dollar on Wednesday, as demand for the safety of the greenback was bolstered by mounting concerns over rising Spanish borrowing costs and fears over the country’s ailing banking sector.
GBP/USD hit 1.5563 during European morning trade, the pair’s lowest since January 25; the pair subsequently consolidated at 1.5580, shedding 0.39%.
Cable was likely to find support at 1.5516, the low of January 23 and resistance at 1.5643, the session high.
Investor sentiment weakened amid concerns over the situation in Spain, where rising bond yields, the growing costs of bank rescues and a recession hit economy fuelled fears that Madrid will be forced to seek an international bailout.
The yield on Spanish 10-year bonds climbed to 6.6% earlier Wednesday, approaching the critical 7% threshold that preceded bailouts in Greece, Ireland and Portugal.
On Tuesday, the European Central Bank rejected Madrid’s plans to recapitalize troubled lender Bankia through the Spanish central bank’s lending facilities, pushing the country’s banking system closer to the brink of collapse.
The pound was unchanged after official data showed that U.K. net lending rose more-than-expected in April, while a separate report showed that U.K. mortgage approvals rose more-than expected last month.
The pound was little changed against the euro, with EUR/GBP dipping 0.01% to hit 0.7990.
Later Wednesday, Italy was set to auction up to EUR6.25 billion of five and 10-year bonds, while European Central Bank President Mario Draghi was to speak. In addition, the U.S. was to release a report on pending home sales.
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