GBP/USD: Sterling to Rise on Mortgage Approvals, Fiscal Cliff Talks

The British pound is looking forward to some respite in its exchanges versus the US dollar after finding support at the 1.6108 price mark. Fiscal cliff talks resume today in the United States, and the markets are hoping for a deal to be reached before the world’s largest economy falls over to higher taxes and automatic spending cuts. Mortgage Approvals for the past month are also in the watch for today.

European investments are called to open slightly higher in cautious trading as President Barack Obama and Congress return to Washington today to deal with the fiscal cliff. With just three days of trading left till the end of the year and major uncertainty over US fiscal talks, traders however are likely to remain on the sidelines, with thin volumes expected. Nevertheless, market participants are expectant that a deal, however small it may be, will be agreed upon by both sides to avert a fiscal disaster in the world’s largest economy.

US Treasury Secretary Timothy F. Geithner said that he will take “extraordinary measures” to postpone a US default into early 2013 while White House and Congress work out a deficit-reduction deal. In a letter to congressional leaders, Geithner reminded that the government will hit its statutory debt ceiling on December 31. To avert such a default, the Treasury will take action to create about $200 Billion in headroom under the debt limit, which would normally last about two months. The aforementioned letter adds urgency to talks between Obama and congressional Republicans on a deficit-reduction plan. Obama has asked that raising the debt ceiling be part of that plan.

Meanwhile, in the United Kingdom, the British Bankers’ Association is scheduled to report on the number of new mortgages approved for home purchase by BBA-represented banks during the previous month. Data for the past four releases have been on an incline, and the November figure is estimated at 34,600. Should the forecast register accordingly, this would be higher than the 33,000 reported for October. This is believed to be good news for the nation’s recovering housing market.

A short-term buy position is advised for the GBPUSD today. Be mindful though of likely technical price corrections.

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