Forexpros – The pound held modest gains against the U.S. dollar on Wednesday, as market sentiment was dented by uncertainty over the outcome of this week’s critical European Union summit and despite weak U.K. manufacturing data.
GBP/USD hit 1.5638 during European early afternoon trade, the daily high; the pair subsequently consolidated at 1.5627, gaining 0.18%.
Cable was likely to find support at 1.5560, Tuesday’s low and a four-day low and short-term resistance at 1.5663 Tuesday’s high.
Market sentiment was hit after the Wall Street Journal reported that an unnamed senior German official expressed pessimism on the prospect of success at the two-day EU summit, scheduled to begin Thursday.
European leaders are to discuss proposed changes to EU treaties which would allow for greater fiscal integration in the single currency bloc, as well as an enlargement of the bloc’s bailout fund, the European Financial Stability Facility and the permanent structure that will replace it, the European Stability Mechanism.
The pound shrugged off data showing that U.K. manufacturing output posted the largest decline in six months in October, while industrial production also posted the biggest drop since April.
The Office for National Statistics said manufacturing production fell 0.7%, disappointing expectations for a modest 0.1% decline.
On the year, manufacturing output rose 0.3%, significantly below expectations for a 1.4% gain, after rising at a annualized rate of 2.0% in September.
Industrial output fell by 0.7% in October, worse than expectations for a 0.3% decline and was down 1.7% on the year.
The poor data underlined concerns over weakening economic conditions in the U.K. and reinforced expectations the Bank of England may introduce more stimulus into the economy to shore up growth.
The pound was also higher against the euro, with EUR/GBP shedding 0.33% to hit 0.8562.
Also Wednesday, U.S. Treasury Secretary Timothy Geithner said the International Monetary Fund has a key role to play in resolving the euro zone’s debt crisis, but dismissed speculation that the Federal Reserve would lend money to the institution.
Forexpros
