The pound climbed against its major rivals in the European session on Tuesday, as European shares rose amid easing concerns over the fallout of China Evergrande Group and on rising oil prices due to supply concerns in the wake of Hurricane Ida.
Investors focus on a slew of monetary policy meetings from major central banks in Japan, U.K., Switzerland and the U.S.
The Fed decision is due on Wednesday and investors hope that the central bank is likely to take a step closer to the tapering of the QE program.
Concerns about Evergrande appeared to be receding for the time being as the markets believe that its contagion effects on the wider Chinese economy could be limited.
Oil prices rebounded after a sell-off on Monday, as some crude production in the Gulf of Mexico remained shut in the wake of Hurricane Ida.
Data from the Office for National Statistics showed that the UK budget posted its second highest deficit on record for the month of August.
Public sector net borrowing, excluding public sector banks, totaled GBP 20.5 billion in August 2021. This was the second-highest August borrowing since monthly records began in 1993.
The pound touched 1.3693 against the greenback and 150.14 against the yen, up from its prior lows of 1.3645 and 149.24, respectively. The currency is likely to face resistance around 1.40 against the greenback and 153.00 against the yen.
The pound rose to 0.8563 against the euro, from an early low of 0.8589, and held steady thereafter. On the upside, 0.84 is possibly seen as its next resistance level.
In contrast, the pound weakened to a 2-week low of 1.2630 against the franc, from Monday’s close of 1.2659. The pound is seen challenging support around the 1.25 mark.
Looking ahead, Canada new housing price index, U.S. building permits and housing starts, all for August, are set for release in the New York session.