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Forex - GBP/USD firms as market gains hopes for fiscal cliff deal

By: Investing.com
Posted: 12/31/2012 3:59:00 PM
Referenced Stocks:

Investing.com - The pound rose against the dollar on Monday as investors crept out of the safety of the greenback on hopes Congress will strike a deal to avoid the fiscal cliff, a combination of sweeping tax hikes and automatic spending cuts due to take effect at the end of 2012.

Failure to reach a deal could contract the economy by 0.5% next year, according to Congressional Budget Office estimates, which would constitute a recession.

In U.S. trading on Monday, GBP/USD was trading at 1.6246, up 0.52%, up from a session low of 1.6134 and off from a high of 1.6274.

The pair was likely to find support at 1.6079, Friday's low, and resistance at 1.6306, the high from Dec. 19.

President Barack Obama on Monday said an agreement was in sight though stressed nothing had been finalized yet, which kept investors parked in the safe-haven dollar earlier, though sentiments began to quickly rebuild that some sort of a deal may be struck by the end of the day, which enticed a few investors out of the safety of the greenback.

Meanwhile in the U.K., the Bank of England reported earlier that U.K. Housing Equity Withdrawal fell to a seasonally adjusted GBP8.0 billion compared to GBP9.4 billion in the preceding quarter.

Analysts had expected U.K. Housing Equity Withdrawal to fall GPB9.1 billion last month.

Still, U.S. fiscal uncertainty served as Cable's chief weather vane on Monday.

The pound, meanwhile, was up against the euro and up against the yen, with EUR/GBP trading down 0.71% at 0.8121 and GBP/JPY up 1.27% at 140.65.







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