Forexpros – The pound extended gains against the U.S. dollar on Monday, rising to a nine-day high as market sentiment found support after a well-received Italian government bond sale, although investors remained cautious ahead of a string of U.K. data later in the week.
GBP/USD hit 1.5717 during U.S. morning trade, the pair’s highest since July 31; the pair subsequently consolidated at 1.5705, rising 0.11%.
Cable was likely to find support at 1.5604, the low of August 9 and resistance at 1.5776, the high of June 20.
Sentiment strengthened as Italy saw borrowing costs rise only slightly after it auctioned the full targeted amount of EUR8 billion of 12-month government bonds at an average yield of 1.69%, up from 1.55% previously.
But the pound remained under pressure amid fears that weak economic data later this week could prompt the Bank of England to implement more easing measures to spur growth.
Last week, BoE Governor Mervyn King indicated that the central bank was unlikely to cut rates soon, saying it would be counterproductive.
The outlook for sterling deteriorated however, after the BoE said that the U.K. economy would barely grow this year and cut its forecasts for the coming years in Wednesday’s quarterly inflation report.
The U.K. was to release data on retail sales, employment and inflation later in the week, while the BoE was to publish the minutes of its August policy meeting, which could indicate how soon more easing measures may be introduced.
Earlier in the day, weak data out of Japan earlier fuelled expectations that world central banks will implement more easing measures to spur the economic recovery.
Official data showed that Japan’s economy grew just 0.3% in the three months to June, half as much as expectations for a 0.6% expansion, from an upwardly revised 1.2% in the first quarter, as export demand was hit by the debt crisis in the euro zone.
Elsewhere, the pound was lower against the euro with EUR/GBP climbing 0.44%, to hit 0.7868.
Trade looked likely to remain subdued on Monday, with no significant economic data releases on the calendar, while volumes were light with many market participants on summer holidays.
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