Forex - Pound near 3-week lows vs. firmer dollar

The pound was trading close to three-week lows against the stronger dollar on Monday after the Federal Reserve said last week that it could start tapering its asset purchase program this year.

GBP/USD hit 1.5366 during European morning trade, the pair’s lowest since June 5; the pair subsequently consolidated at 1.5369, shedding 0.33%.

Cable was likely to find support at 1.5290, the low of June 5 and resistance at 1.5398, the session high.

Demand for the dollar continued to be underpinned after Fed Chairman Ben Bernanke said Wednesday the bank could begin slowing asset purchases by the end of 2013 and wind them down completely by the middle of 2014 if the economy picks up as the central bank expects.

Sterling was lower against the euro, with EUR/GBP easing up 0.16% to 0.8522.

Sentiment on the euro remained fragile as peripheral euro zone bond yields continued to grind higher amid concerns over the prospect of an end to the Fed’s stimulus program.

The yield on Spanish 10-year bonds rose to 5% for the first time since early April on Monday, up from 4.88% on Friday. Meanwhile, the yield on Italian 10-year bonds climbed to 4.71% from 4.58% on Friday.

Separately, a report showed that German business confidence strengthened modestly in June.

The German research institute, Ifo said its Business Climate Index rose to a seasonally adjusted 105.9 in June from a reading of 105.7 in May, in line with market expectations.