Investing.com - The pound edged lower but steadied against the dollar on Tuesday, as investors avoided sterling ahead of a Sept. 18 Scottish referendum on independence from the U.K., though bottom fishing stabilized the pair.
In U.S. trading on Tuesday, GBP/USD was down 0.06% at 1.6095 up from a session low of 1.6064 and off a high of 1.6156.
Cable was likely to find support at 1.6057, the low from Nov. 19, 2013, and resistance at 1.6233, Monday's high.
The pound came under heavy selling pressure on Monday after a weekend YouGov/Sunday Times found that 51% in Scotland favored voting for independence from the U.K. in a referendum set to take place on Sept. 18.
Uncertainty as to what currency a newly independent Scotland would adopt, how much U.K. debt it would assume and what steps London would take to keep its northern neighbor in the fold sent investors avoiding sterling on Monday and into Tuesday.
Elsewhere, largely positive U.K. data gave the pound some support by bringing in the bottom fishers.
Official data showed that U.K. manufacturing production rose 0.3% in July, in line with expectations, after a 0.3% gain the previous month.
A separate report showed that the U.K. trade deficit widened to £10.19 billion in July, from £9.41 billion in June. Analysts had expected the trade deficit to narrow to £9.10 billion in July, though expectations remained firm that the economy continues to recover.
The dollar, meanwhile, remained in positive territory over the pound on hawkish language out of the Federal Reserve Bank of San Francisco, which hinted that markets may be underestimating the pace at which rates may rise, evidenced by low volatility.
"Recently, subdued levels of volatility in financial markets have received some attention. For example, Federal Reserve Chair Janet Yellen (2014) noted that 'indicators of expected volatility in some asset markets have fallen to low levels, suggesting that some investors may underappreciate the potential for losses and volatility going forward,''" the report read.
"Prices of financial assets, such as stocks and bonds, are sensitive to unexpected changes in interest rates because their present values are determined by discounting future cash flows. Thus, the low volatility in asset markets could, in part, reflect market participants’ relative certainty about the future course of interest rates."
Elsewhere, sterling was down against the euro, with EUR/GBP up 0.22% at 0.8026, and up against the yen, with GBP/JPY up 0.19% at 171.06.
On Wednesday, Bank of England Governor Mark Carney and several monetary policy committee members are to testify on inflation and the economic outlook before Parliament’s Treasury committee.
While no major U.S. data is due for release on Wednesday, investors will prep for Thursday's report on initial jobless claims and Friday's data on retail sales and consumer sentiment.