Forex - GBP/USD extends losses as risk sentiment drops

Investing.com – The pound extended losses against the U.S. dollar on Monday, hitting a fresh three-day low as simmering fears over sovereign debt contagion in the euro zone and worries over a potential U.S. debt default saw risk sentiment weaken.

GBP/USD hit 1.6061 during European morning trade, the pair’s lowest since July 13; the pair subsequently consolidated at 1.6078, shedding 0.36%.

Cable was likely to find support at 1.5904, the low of July 13 and resistance at 1.6175, Friday’s high.

Spanish government bond yields came under pressure on Monday, climbing to a euro-lifetime high of 6.31%, approaching the 7% mark that prompted peripheral euro zone nations, Greece, Portugal and Ireland to seek bailouts.

Yields on Italian bonds also climbed to a record high of 6.02%, while yields on two-year Greek debt soared to a euro-era record of 34.37%.

Euro zone finance ministers were to meet Thursday to focus on “the financial stability of the euro area as a whole and the future financing of the Greek program,” according to the president of the European Council, Herman Van Rompuy.

Meanwhile, U.S. President Barack Obama said over the weekend that the U.S. government was “running out of time” in regards to negotiations over lifting the country’s USD14.3 trillion debt ceiling before an August 2 deadline.

Ratings agencies Moody’s and Standard & Poor’s both warned last week that a failure to raise the debt limit in time would result in a downgrade in the credit rating of the world’s largest economy.

Sterling was also weighed after industry data showed earlier that U.K. house prices fell 1.6% in July, the first decline this year. Home prices rose 0.6% in June.

Elsewhere, the pound was higher against the euro, with EUR/GBP down 0.45% to hit a six-week low of 0.8735.

Later in the day, the U.S. was to publish a government report on the balance of domestic and foreign investments.