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Forex - GBP/USD erases gains, focus remains on U.S. budget talks

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Investing.com - " The pound erased gains against the U.S. dollar on Wednesday, while investors hoped for a last minute U.S. budget deal before Thursday's deadline to raise the debt limit and avoid a sovereign default.

GBP/USD pulled away from 1.6058, the pair's highest since October 9, to hit 1.5969 during U.S. morning trade, down 0.17%.

Cable was likely to find support at 1.5913, Tuesday's low and resistance at 1.6120, the high of October 9.

Senate leaders were to resume negotiations aimed a breaking the impasse later Wednesday, after a last minute deal put forward by House Republicans collapsed.

On Tuesday, Fitch ratings agency placed its triple-A rating on the U.S. on "rating watch negative" on Tuesday, saying the political deadlock has undermined confidence in U.S. economic policy.

The U.S. Treasury has said that if an agreement to raise the USD16.7 trillion debt ceiling is not struck ahead of Thursday's deadline, the U.S. will face an unprecedented sovereign debt default.

The pound found support earlier, after data showed that the number of people claiming unemployment benefits in the U.K. posted the largest decline since June 1997 in September.

The Office for National Statistics said that the U.K. claimant count fell by 41,700 in September, outstripping expectations for a decline of 25,000 people.

The previous month's figure was revised to a drop of 41,600 people from a previously reported decrease of 32,600.

The rate of unemployment held steady at 7.7% in August, in line with expectations and unchanged from July.

The ONS said the average earnings index rose 0.7% in August, below expectations for a 1% increase, after rising by 1.1% in the previous month.

Sterling was lower against the euro with EUR/GBP edging up 0.11%, to 0.8464.

In the euro zone, data showed that the annual rate of consumer inflation was unchanged from a preliminary estimate of 1.1% in September.

A separate report showed that the euro zone's trade surplus widened to EUR12.3 billion in August from EUR11 billion in April, broadly in line with forecasts.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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