Investing.com - The pound edged higher against the U.S. dollar on Monday, as Friday's upbeat U.K. economic growth report continued to support and the results of European bank stress tests published over the weekend mildly lifted market sentiment.
GBP/USD hit 1.6122 during European morning trade, the pair's highest since October 22; the pair subsequently consolidated at 1.6102, adding 0.12%.
Cable was likely to find support at 1.6015, the low of October 24 and resistance at 1.6186, the high of October 21.
The pound remained supported after the Office of National Statistics reported on Friday that U.K. gross domestic product expanded by 0.7% in the third quarter, slowing from 0.9% in the three months to June, but in line with forecasts.
On a year-over-year basis, GDP grew 3%, in line with forecasts, down from annual growth of 3.2% in the second quarter.
The dominant service sector continued to be the biggest contributor to growth, followed by production, which includes manufacturing. Construction growth also picked up in the third quarter the ONS said.
The data fuelled expectations that the broad based economic recovery in the U.K. could prompt the Bank of England to hike interest rates in the early part of 2015.
Meanwhile, investor confidence also improved as the European Central Bank announced the results of yearlong tests to assess the finances on 150 banks on Sunday. Overall, 25 banks were found to have a capital shortfall, but most have already taken steps to resolve this, the ECB said.
In total, 13 banks still need to come up with a total of €9.5 billion in extra capital, which was at the lower end of market expectations.
Sterling was higher against the euro, with EUR/GBP down 0.10% to 0.7868.
The euro weakened after German research institute Ifo said its index of business climate slid to 103.2 this month from 104.7 in September. It was the lowest level in almost two years and was below forecasts of 104.3.
German firms reported that they are more gloomy about current conditions and future prospects than last month, fuelling fears over the outlook for fourth quarter growth.
Later in the day, the U.K. was to release private sector data on retail sales, while the U.S. was to publish an industry report on pending home sales.