Forex - GBP/USD edges higher in light trade

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Investing.com - The pound was higher against the U.S. dollar in holiday-thinned trade on Monday, but sterling remained under pressure as concerns over U.S. fiscal policy continued to weigh.

GBP/USD hit 1.6204 during European morning trade, the session high; the pair subsequently consolidated at 1.6190, adding 0.13%.

Cable was likely to find support at 1.6104, the low of December 14 and resistance at 1.6269, the high of December 18.

Market sentiment remained under pressure as investors continued to monitor developments surrounding the fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1.

Doubts over whether a deal will be reached ahead of the year-end intensified late Thursday after House Speaker John Boehner pulled his so-called "Plan B" fiscal cliff option, which called for tax increases only on Americans earning USD1 million or more per year, because his Republican colleagues did not support the legislation.

The U.S. House has adjourned for the Christmas holiday, fueling speculation that policymakers will not be able to avert the fiscal cliff. Without a deal, the U.S. could fall back into recession and drag much of the world down with it.

Adding to concerns, Italian Prime Minister Mario Monti tendered his resignation after only 13 months in office, paving the way for a highly uncertain national election in February.

Sterling was lower against the euro with EUR/GBP edging 0.11% higher, to hit 0.8162.

Trading volumes were expected to remain light because many traders have closed books to lock in profit before the end of the year, reducing liquidity in the market and increasing the volatility.


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This article appears in: Investing , Forex and Currencies

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