Forex - GBP/USD falls as U.S. fiscal concerns spark dollar demand

The pound edged lower against the dollar on Friday after a fiscal impasse in the U.S. Congress heated up and sparked fears of a government shutdown, while hawkish comments from a Federal Reserve official also sparked demand for the greenback.

In U.S. trading on Friday, GBP/USD was trading at 1.6019, down 0.08%, up from a session low of 1.5987 and off from a high of 1.6066.

Cable was likely to find support at 1.5885, Tuesday's low, and resistance at 1.6163, Wednesday's high.

In the U.S. earlier, the House of Representatives gave the green light to legislation to fund the government through Dec. 15, however, lawmakers voted to defund President Barack Obama's healthcare bill, the Affordable Care Act.

While the bill faces little chance of survival in the Senate, not to mention a presidential veto, the posturing sparked fears of brinkmanship and inaction that sent investors seeking safety in the dollar ahead of a fiscal showdown brewing in the U.S.

Failure to agree on a solution could result in a government shutdown in October, and the growing uncertainty sent investors snapping up safe-haven dollar positions.

Elsewhere, St. Louis Federal Reserve President James Bullard said earlier that the U.S. central bank could decide to taper its stimulus program at its October meeting, which supported the greenback somewhat.

Federal Reserve stimulus programs such as its USD85 billion bond-buying program aim to spur recovery by driving down long-term interest rates, which weakens the greenback.

The Federal Reserve will hold a monetary policy meeting Oct. 29-30 but is not due to hold a press conference then, which left many expecting a decision to taper asset purchases to come in December prior to Bullard's comments.

Meanwhile in the U.K., official data showed that public-sector net borrowing rose less than expected in August, rising by GBP11.5 billion after a downwardly revised 1.1% decline the previous month. Analysts were expecting public-sector net borrowing to rise by GBP12 billion last month.

The pound, meanwhile, was down slightly against the euro and down against the yen, with EUR/GBP up 0.05% at 0.8444 and GBP/JPY down 0.18% at 159.15.