Investing.com - The pound rose to eight month highs against the broadly weaker dollar on Monday as news that Lawrence Summers withdrew from the contest to be the next Federal Reserve chairman sparked a broad-based risk rally.
GBP/USD hit 1.5958 during European morning trade, the highest since January 18; the pair subsequently consolidated at 1.5942, gaining 0.41%.
Cable was likely to find support at 1.5850 and resistance at 1.6003, the high of January 18.
Investor confidence was boosted after Summers' pulled out of the race to succeed Ben Bernanke as Fed chairman. Markets had viewed Summers' as being likely to roll back economic stimulus measures more aggressively than his main rival for the post, Janet Yellen.
Investors were also focusing on the outcome of the upcoming Fed policy meeting, which concludes on Wednesday, after a recent series of lukewarm U.S. data raised doubts over whether the central bank will start to taper its USD85 billion-a-month bond buying program this month.
Elsewhere, sterling was slightly lower against the euro, with EUR/GBP easing up 0.10% to 0.8382.
European Central Bank President Mario Draghi said Monday that the economic recovery in the euro zone remains "fragile" and reiterated that interest rates will remain at current or lower levels for an "extended period". The comments came during a speech in Berlin.
The euro zone was to release data on consumer price inflation later Monday, while the U.S. was to publish the Empire state manufacturing index as well as data on industrial production and the capacity utilization rate.
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