Forex Focus - The pound was little changed against the U.S. dollar on Tuesday, as uncertainty over the outcome of a meeting of European Union ministers later in the day overshadowed strong U.K. manufacturing production and trade balance reports.
GBP/USD hit 1.5546 during European afternoon trade, the pair’s highest since July 6; the pair subsequently consolidated at 1.5528, inching up 0.01%.
Cable was likely to find support at 1.5469, Monday’s low and resistance at 1.5589, the high of June 12.
Market sentiment remained fragile as markets eyed talks between EU finance ministers, after their euro zone agreed on Monday to make EUR30 billion in aid available to assist Spain’s struggling banking sector by the end of the month, while also supporting plans to extend Spain’s deficit target deadline by one year to 2014.
They made no apparent progress, however, on activating the bloc's rescue funds to intervene in bond markets and bring down Spain and Italy’s spiraling borrowing costs.
Spain’s 10-year government bonds eased to 6.9% earlier, moving below the critical 7% threshold which is widely seen as unsustainable in the long term.
Markets were also jittery after official data showed that Chinese exports and imports in June slowed from the previous month, as weakening global demand weighed.
The pound found support earlier, after the U.K. Office for National Statistics said that manufacturing production rose by 1.2% in May, blowing past expectations for a more modest 0.1% gain, after falling by 0.8% in April.
The report also showed that industrial production rose 1.0% in May, defying expectations for a 0.2% drop, after declining a revised rate of 0.4% in April.
A separate report showed that the U.K.’s goods trade deficit narrowed more-than-expected in May, as exports picked up from the previous month.
The ONS said the country's goods trade deficit narrowed to a seasonally adjusted GBP8.4 billion in May from a deficit of GBP9.7 billion in April, as exports jumped 6.6%.
Elsewhere, sterling was trading close to a three-and-a-half year high against the euro with EUR/GBP easing 0.04%, to hit 0.7927.
Also Tuesday, official data showed that French industrial production tumbled 1.9% in May, far more than expectations for a 0.9% fall and following a 1.4% rise the previous month.