Forex - GBP/USD remains higher, but gains capped

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Investing.com - The pound remained higher against the U.S. dollar on Monday, but sterling's gains were expected to remain limited as concerns over political uncertainty in the euro zone continued to weigh.

GBP/USD hit 1.5751 during U.S. morning trade, the session high; the pair subsequently consolidated at 1.5732, adding 0.22%.

Cable was likely to find support at 1.5689, the day's low and an almost five month low and resistance at 1.5772, the high of January 29.

Investor confidence was hit by fresh concerns over the euro zone as an escalating political crisis in Spain pushed the country's borrowing costs higher.

The yield on Spanish 10-year bonds rose to 5.43% on Monday from 5.21% on Friday as Prime Minister Mariano Rajoy faced calls to resign, following corruption allegations against him and senior officials in the ruling Popular Party.

Meanwhile, Spanish employment data showed that the number of people unemployed rose by 2.7% or 132,055 to 4.98 million in January.

Italian 10-year bond yields rose to 4.42% on Monday amid uncertainty over the outcome of upcoming elections as former Prime Minister Silvio Berlusconi gained ground in opinion polls.

In the U.K., data showed that the construction purchasing managers' index held steady at 48.7 in January, unchanged from December's reading, disappointing expectations for an improvement to 49.1.

The weak data fuelled concerns over the outlook for the U.K. economy, which contracted by 0.3% in the three months to December.

Elsewhere, sterling was sharply higher against the euro with EUR/GBP declining 0.86%, to hit 0.8616.

Also Monday, the U.S. Census Bureau said factory orders rose by a seasonally adjusted 1.8% in December, compared to expectations for a gain of 2.2%.

Factory orders in November fell by a revised 0.3%.


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This article appears in: Investing , Forex and Currencies

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