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Forex - GBP/USD drops on banking unease in Europe

Published 12/28/2011, 10:57 PM
Updated 12/28/2011, 11:00 PM
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Investing.com - The pound fell against the dollar Thursday, weakening amid a global rush for the greenback fueled by reports the credit crisis in Europe shows no signs of loosening its grip.

GBP/USD hit 1.5456 during in Asian trading Thursday, down 0.02% and up from a session low of 1.5429 and a high of 1.5464.

The pair was likely to find technical support at 1.5354 and resistance at 1.5608.

In Europe, news broke that financial institutions were lining up to make deposits with the European Central Bank.

Money at the European Central Bank's overnight deposit hit a record EUR452.03 billion recently, fanning fears that lending remains tight.

The news sparked global demand for dollars versus other currencies, even as terms on an Italian bond auction soothed investor concerns over the health of the country's economy for just a little while.

Italy sold EUR9 billion in six-month bills carrying an average yield of 3.25%, down from a record-high 6.50% in a previous auction in November.

The country also sold EUR1.73 billion of two-year zero-coupons at a 5% yield.

However, the government will return to the market later Thursday and sell EUR8.5 billion in longer-term debt.

Many investors remain worried markets will demand more yield for their money when longer-term debt is concerned.
 
Meanwhile, the pound was mixed against the euro and the yen, with EUR/GBP falling 0.05% to hit 0.8368 and GBP/JPY falling 0.17% to hit 120.27.

The U.S. government, meanwhile, is set to unveil weekly jobless claims later Thursday, while the Chicago Purchasing Managers' Index will reveal the economic health of the manufacturing sector in the Chicago area of the Midwest.

Also in the U.S., crude and gasoline inventory numbers will come out as will pending home sales data.

In Europe, German inflation numbers will hit the wire, and the European Central Bank will also release data on private loans as well as on the level of the money supply.

Lastly, South Korean inflation figures are due out later Thursday as is Japan's Manufacturing Purchasing Managers' Index.




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