Forexpros – The pound rallied against the U.S. dollar on Friday, after Chinese economic growth figures met expectations and following the launch of a new lending program by the Bank of England.
GBP/USD hit 1.5392 on Thursday, the pair’s lowest since June 6; the pair subsequently consolidated at 1.5574 by close of trade on Friday, up 0.65% on the week.
Cable is likely to find support at 1.5469, the low of July 9 and resistance at 1.5691, the high of July 4.
Investor confidence was boosted Friday after data showed that China’s gross domestic product expanded 7.6% in the second quarter, in line with expectations and better than the slower rates of growth some investors had feared.
Sentiment on sterling was further buoyed after the BoE announced a new GBP80 billion ‘funding for lending’ program, which will offer cheaper loans to households and businesses.
The pound was also supported by safe haven buying after ratings agency Moody’s downgraded Italy’s sovereign debt rating late Thursday, citing doubts over the government’s ability to enact badly-needed reforms.
Despite the downgrade, Italy managed to successfully auction the maximum EUR 5.25 billion of two and five-year bonds on Friday, but the yield on the country’s 10-year bonds climbed above 6% following the auction.
The pound advanced to a three-and-a-half year high against the euro on Friday, amid sustained concerns over a lack of progress in tackling the debt crisis in the euro zone, with EUR/GBP settling at 0.7863, down 0.58% on the day.
In the U.S., data on Friday showed that consumer confidence unexpectedly dropped to the lowest level in seven months in July.
The University of Michigan said its index of consumer sentiment fell to a seasonally adjusted 72.0, from 73.2 in June, confounding expectations for an increase to 73.4.
A separate report showed that U.S. producer price inflation ticked up 0.1% in July, against expectations for a 0.5% decline.
The data came after Wednesday’s minutes from the Federal Reserve’s June meeting showed that few policymakers believed more asset purchases would be necessary to support growth in the economy.
In the week ahead, investors will be focusing on testimony by Federal Reserve Chairman Ben Bernanke, amid speculation over the possibility of more quantitative easing from the central bank.
Market participants will also be watching testimony by BoE Governor Mervyn King on Tuesday, as well as the publication of the minutes of the BoE’s July meeting.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, July 16
The U.K. is to release an industry report on house price inflation, an important indicator of demand in the housing market.
The U.S. is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. The country is also to release official data on business inventories and manufacturing activity in New York.
Tuesday, July 17
In the U.K., BoE Governor Mervyn King and other senior policymakers are to testify before Parliament’s Treasury Committee. The country is also to release official data on consumer price inflation, which accounts for the majority of overall inflation.
Later Tuesday, the U.S. is to publish official data on consumer price inflation, as well as reports on the capacity utilization rate and industrial production. In addition, Federal Reserve Chairman Ben Bernanke is to testify on the on the bank’s monetary policy report before the Senate Banking Committee in Washington.
Wednesday, July 18
The U.K. is to publish official data on claimant count change and the unemployment rate, while the BoE is also to publish the minutes of its July policy-setting meeting.
The U.S. is to publish official data on building permits, an excellent gauge of future construction activity, as well as a report on housing starts. The country is also to release government data on crude oil stockpiles.
Meanwhile, Federal Reserve Chairman Ben Bernanke is to testify for a second day on the on the bank’s monetary policy report before the Senate Banking Committee in Washington.
Thursday, July 19
The U.K. is to produce official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.
Later Thursday, the U.S. is to publish government data on initial jobless claims, as well as reports on existing home sales and manufacturing activity in Philadelphia.
Friday, July 20
The U.K. is to round up the week with official data on public sector net borrowing, a leading indicator of economic health.
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