Forexpros – The pound fell to a two-day low against the U.S. dollar on Friday, paring some of the week’s gains as market sentiment weakened amid renewed concerns over the handling of the debt crisis in the euro zone.
GBP/USD hit 1.5779 on Wednesday, the pair’s highest since November 21; the pair subsequently consolidated at 1.5594 by close of trade on Friday, rising 0.70% over the week.
Cable is likely to find support at 1.5468, the low of November 29 and resistance at 1.5797, the high of November 21.
Risk sentiment found support on Friday after official data showed that the U.S. unemployment rate dropped unexpectedly to a two-and-a-half year low of 8.6% in November, as the U.S. economy created 120,000 new jobs.
But sterling quickly erased gains amid skepticism over whether the euro zone’s bailout fund, the European Financial Stability Facility, can contain the region’s debt crisis and amid speculation over a potential downgrade of Spain.
Also Friday, data showed that construction activity in the U.K. fell less-than-expected in November. Markit said that its U.K. construction PMI fell to a 52.3 in November, after a reading at 53.9 the previous month.
The pound came under pressure on Thursday after the BOE said that sovereign and banking risks emanating from the euro zone remain the most significant and immediate threat to UK financial stability.
The report came after data showing that manufacturing activity in the U.K.
contracted for a second successive month in November.
Market sentiment was strongly boosted on Wednesday after six major central banks including the Federal Reserve and the Bank of England said they had agreed to lower dollar swap rates to prevent a lack of liquidity in the global financial system.
The announcement came after China said that it plans to cut bank’s reserve requirement ratios in an effort to help boost liquidity and support the world’s second largest economy amid global market turmoil.
In the week ahead, investors will be closely watching the ECB’s policy meeting on Thursday, amid expectations for a 0.5% rate cut by the bank. Meanwhile, EU leaders are to hold a summit meeting to address the region’s crisis on Friday.
Also next week, the U.S. is to release data on service sector activity and jobless claims, while the U.K. is to publish reports on retail sales and manufacturing activity.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, December 5
In the U.S., the Institute of Supply Management is to release a report on service sector activity, a leading indicator of economic health. The U.S. is also to publish government data on factory orders, a leading indicator of production.
Tuesday, December 6
The U.K. is to publish industry data on retail sales, an important indicator of economic health.
Wednesday, December 7
The U.K. is to publish official data on manufacturing and industrial production, leading indicators of economic health. Meanwhile, the National Institute of Economic and Social Research is to publish its quarterly GDP estimate.
Later in the day, the U.S. is to release government data on crude oil stockpiles.
Thursday, December 8
In the U.K., the Bank of England is to announce its benchmark interest rate.
Also Thursday, the U.S. is to publish its weekly report on initial jobless claims, the nation’s earliest economic data.
Friday, December 9
The U.K. is to publish official data on producer price inflation input, a leading indicator of consumer inflation, as well as data on the trade balance, the difference in value between imported and exported goods over the reported month.
The U.S. is to round up the week with data on the trade balance, while the University of Michigan is to release preliminary data on consumer sentiment and inflation expectations, leading indicators of economic health.
Forexpros
