GBP/USD hit 1.61"§ during U.S. morning trade, the session low; the pair subsequently consolidated at 1.6136, slipping 0.20%.
Cable was likely to find support at 1.6104, the low of December 14 and resistance at 1.6206, the session high.
Trading was expected to remain subdued as many investors already closed books to lock in profit before the end of the year, reducing liquidity in the market.
Markets were jittery as investors continued to monitor developments surrounding the fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1.
Doubts over whether a deal will be reached ahead of the year-end intensified late Thursday after House Speaker John Boehner pulled his so-called “Plan B” fiscal cliff option, which called for tax increases only on Americans earning USD1 million or more per year, because his Republican colleagues did not support the legislation.
The U.S. House has adjourned for the Christmas holiday, fueling speculation that policymakers will not be able to avert the fiscal cliff. Without a deal, the U.S. could fall back into recession and drag much of the world down with it.
Elsewhere, Italian Prime Minister Mario Monti tendered his resignation after only 13 months in office, paving the way for a highly uncertain national election in February.
Sterling was also lower against the euro with EUR/GBP rising 0.34%, to hit 0.8183.
There were no major economic releases or earnings in the U.S. on Monday.