Forex - EUR/GBP erases gains as Portugal debt woes weigh

Forex Pros – The pound erased losses against the euro on Tuesday, rebounding from a five-month low as yields on Portuguese government debt remained close to record highs.

EUR/GBP retreated from 0.8835, the pair’s highest since October 26, to hit 0.8804 during European morning trade, dipping 0.03%.

The pair was likely to find support at 0.8759, Monday’s low and resistance at 0.8835, the days high and a five-month high.

The euro’s earlier gains came after European Central Bank President Jean-Claude Trichet said on Monday that inflation in the euro zone was "durably" above the central bank's target, underlining the view that the bank will raise interest rates in April.

Meanwhile, the U.K. Office for National Statistics said earlier that gross domestic product fell 0.5% in the fourth quarter, compared with an earlier estimate of 0.6%. Excluding the impact of the coldest December in a century, growth was “broadly flat,” the statistics office said.

A separate report showed that the U.K. current account deficit widened to GBP10.5 billion from GBP 8.7 billion pounds in the previous three months.

The pound was also slightly higher against the U.S. dollar, with GBP/USD easing up 0.04% to hit 1.5998.

Also Tuesday, the Bank of England said U.K. mortgage approvals rose broadly in line with expectations to hit 46,967 in February. The figure compares with an upwardly revised 46,152 in January.