Forexpros – The pound remained lower against the U.S. dollar on Tuesday, as concerns over the worsening of Spain’s financial troubles and grim economic reports from the euro zone prompted investors to flock to safer assets.
GBP/USD hit 1.5322 during European afternoon trade, the pair’s lowest since June 1; the pair subsequently consolidated at 1.5343, shedding 0.26%.
Cable was likely to find support at 1.267, the low of June 1 and a four-and-a-half low and resistance at 1.5414, Monday’s high.
Market sentiment weakened after Spain’s Treasury Minister Cristobal Montoro said that financial markets were effectively closed to Spain because of the current high level of the country’s borrowing costs.
The yield on Spanish 10-year bonds has surged to euro-era highs in recent weeks, hovering near the critical 7% threshold, which is seen as unsustainable in the long term, fuelling fears that Madrid will be forced to seek an international bailout in order to shore up its ailing banking sector.
Investor confidence was also hit after revised data showed that the euro zone’s services sector contracted at a slightly slower rate than initially expected in May, but still shrank at the fastest pace since June 2009, while another report showed that retail sales in the bloc dropped 1% in April.
In addition, official data showed that German factory orders dropped 1.9% in April, compared to expectations for a 1% decline, fanning concerns over the impact of the ongoing sovereign debt crisis on the region’s largest economy.
The pound had climbed to a session high against the greenback earlier, amid hopes for a breakthrough on the debt crisis in the euro zone, ahead of a teleconference of finance ministers from the Group of Seven industrialized nations later in the day.
Elsewhere, sterling was higher against the euro with EUR/GBP declining 0.39%, to hit 0.8092.
Later Tuesday, the Institute for Supply Management was to release a report on U.S. non-manufacturing activity, while markets in the U.K. were to remain closed for a national holiday.
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