Investing.com - The pound fell against the dollar on Monday as investors flocked to the safety of the liquid U.S. currency after a U.S. Senator said a deal to avoid fiscal reforms in the U.S. would likely fail to become reality this year.
In U.S. trading on Monday, GBP/USD was trading at 1.6084, down 0.33%, up from a session low of 1.6067 and off from a high of 1.6202.
The pair was likely to find support at 1.6014, the low of Dec. 10, and resistance at 1.6206, the high from Dec. 24.
Fears the U.S. will careen over a fiscal cliff grew after Senate Majority Leader Harry Reid said earlier that Jan. 1 may come and go without a deal to prevent tax breaks from expiring and deep spending cuts from kicking in at the close of 2012.
Meanwhile, President Barack Obama and Congress returned to work on Thursday to discuss ways to avoid the fiscal cliff, though hopes continued to fade a deal may be struck in time.
Before the Christmas holidays, Republicans in the U.S. House of Representatives canceled plans to vote on a budget proposal tabled by House Speaker John Boehner, himself a Republican, which called for tax hikes on incomes over USD1 million, well above a White House proposal calling for tax hikes on incomes topping USD400,000.
Rebellion in Boehner's own party spooked investors on fears that the U.S. will fail to reach a budgetary deal in time, which carried over into Thursday trading.
While taxes won't go up across the board on Jan. 2 and while spending cuts will take time to materialize, safe-haven demand for the U.S. dollar grew on Thursday due to the building uncertainty.
Private-sector economists have warned that fiscal uncertainty alone is prompting households and businesses to throttle back on investing and spending, which could cool the U.S. economy even if a deal is struck early in 2013 and a worst-case recession is avoided.
Meanwhile in the U.K., the British Banker's Association reported that mortgage approvals rose less than expected in November, gaining by 33,600 after a 33,100 increase in October.
Analysts had expected mortgage approvals to rise by 34,600 in November, which sent investors chasing greenback positions in the U.S., where data disappointed as well, fueling risk-off trading sentiments.
The U.S. Census Bureau reported earlier that new home sales rose by 4.4% to a seasonally adjusted 377,000 units in November, missing expectations for an increase to 378,000.
New home sales for October were revised down to 361,000 units from a previously reported 368,000.
The news sent investors seeking safety in the U.S. as did soft consumer confidence figures.
U.S. consumer confidence slumped to a four-month low, industry data showed on Thursday.
In a report, the Conference Board, a market research group, said its index of consumer confidence fell to 65.1 in December from a reading of 71.5 in November, whose figure was revised down from 73.7.
Analysts had expected the index to decline to 70.0 in December.
The news wasn't totally bearish for risk-on asset classes.
Fewer people sought initial jobless claims in the U.S. than expected last week.
The U.S. Department of Labor said earlier the number of individuals filing for initial jobless benefits in the week ending Dec. 22 fell by 12,000 to a seasonally adjusted 350,000, lower than market calls for a decline of 2,000 to 360,000.
Jobless claims for the preceding week were revised up to 362,000 from a previously reported 361,000,
Continuing jobless claims in the week ended December 15 fell to 3.206 million.
Analysts were expecting that figure to fall to 3.200 million from last week's revised figure of 3.238 million.
The pound, meanwhile, was down against the euro and up against the yen, with EUR/GBP trading up 0.32% at 0.8220 and GBP/JPY up 0.18% at 138.42.
On Friday, markets will track pending U.S. home sales and Chicago-area manufacturing data.
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