Cable was likely to find support at 1.6460, the low of Dec. 30 and resistance at 1.6618, the high from Aug. 19, 2011.
Trading volumes remained limited as many investors already closed books before the end of the year, reducing liquidity in the market, which helped exaggerate market moves.
Demand for the pound was strong due to recent weeks of positive U.K. economic reports, which fueled expectations on Tuesday for the Bank of England to raise interest rates ahead of other central banks.
Optimism for BoE policy shifts overshadowed solid U.S. consumer confidence data.
The Conference Board reported earlier that its index of U.S. consumer confidence improved to 78.1 in December from 72.0 in November, beating consensus forecasts for a 76.0 reading.
Also Tuesday, the Standard & Poor’s/Case- Shiller 20-city home price index rose at an annualized rate of 13.6% in October from a year earlier, the strongest pace since February of 2006 and above forecasts for an increase of 13.0%.
The data confirmed expectations for the Federal Reserve to continue winding down stimulus programs such as its USD75 billion in monthly bond purchases next year and let the economy stand on its own feet.
Fed bond purchases tend to weaken the dollar by driving down interest rates to spur recovery.
Elsewhere, industry data revealed that the Chicago purchasing managers’ index fell to a seasonally adjusted 59.1 this month from 63.0 in November. Analysts had expected the index to decline to 61.0 in December, which gave the pound the upper hand over the dollar on Tuesday.
Sterling was higher against the euro, with EUR/GBP down 0.65% to 0.8311, and up against the yen, with GBP/JPY up 0.60% at 174.50.
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