Forexpros – The pound pared gains against the U.S. dollar on Wednesday, pulling back from a nine-day high as initial optimism following a refinancing operation by the European Central Bank gave way to renewed fears over the euro zone’s debt crisis.
GBP/USD retreated from 1.5773, the pair’s highest since December 8, to hit 1.5671 during U.S. morning trade, up just 0.05% on the day.
Cable was likely to find support at 1.5657, the days low and resistance at 1.5773, the days high and a nine-day high.
Risk appetite was hit as Italian and Spanish short-term borrowing costs crept higher earlier after the ECB allotted EUR489.19 billion in three-year loans to 523 European banks in an attempt to avert a liquidity crunch in the euro zone.
It is hoped that the funds may also be used by lenders to purchase the sovereign debt of indebted euro zone states, easing pressure on borrowing costs.
The amount allotted was the largest ever for a longer-term refinancing operation by the ECB and underlined concerns over the scale of the financial crisis in the euro zone.
In the U.K., the minutes of the Bank of England’s December meeting showed that policymakers believed the balance of risks for growth and the outlook for inflation had not significantly altered from the previous month, but indicated that the bank may increase its asset purchase program in the New Year.
“Some members continued to note that the balance of risks to inflation in the November Inflation Report projections meant that a further expansion of the asset purchases program might well become warranted in due course,” the minutes said.
Earlier Wednesday, a report by researchers GfK showed that consumer confidence in the U.K. weakened in December, hitting the lowest level since February 2009.
The pound surged to an 11-month high against the euro, with EUR/GBP shedding 0.25% to hit 0.8330.
Also Wednesday, a report by the National Association of Realtors said that U.S. existing home sales rose by 4% to a seasonally adjusted 4.42 million units in November, falling significantly short of expectations for a gain of 15.5% to 5.03 million units.
Existing home sales in October were revised down by nearly 14% to 4.25 million units from a previously reported 4.97 million.
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