Forexpros – The pound ended the week slightly higher against the U.S. dollar on Friday, as risk sentiment improved after European leaders agreed on a plan to tighten fiscal integration in the euro zone, but sterling’s gains were limited by lingering concerns over the region’s debt crisis.
GBP/USD hit 1.5769 on Thursday, the pair’s highest since November 30; the pair subsequently consolidated at 1.5667 by close of trade on Friday, gaining 0.27% over the week.
Cable is likely to find support at 1.5560, the low of December 6 and resistance at 1.5779, the high of November 30.
European leaders agreed to increase the financial backstops to countries with debt problems by channeling EUR200 billion of funds to the International Monetary Fund. However, they postponed decision on increasing the capacity of the European Stability Mechanism until March.
U.K. Prime Minister David Cameron vetoed changes to the EU treaty after failing to secure concessions, meaning new fiscal rules will have to operate as an intergovernmental agreement.
Meanwhile, investors remained cautious amid uncertainty over whether the European Central Bank will now play a bigger role in stabilizing the region’s bond market.
Official data showed earlier Friday that producer price inflation input in the U.K. rose unexpectedly to 0.1% in November, from a 0.8% decline the previous month. Analysts had expected U.K. PPI input to fall 0.1% in November.
In the U.S., official data showed that the trade deficit narrowed to USD43.5 billion in November, in line with expectations, from a deficit of USD44.2 billion the previous month.
In a separate report, the University of Michigan said that its index of consumer sentiment rose more-than-expected to 67.7 in November, from 64.1 the previous month.
The greenback found support on Thursday after the U.S. Department of Labor said that the number of people who filed for unemployment assistance in the U.S. last week fell to the lowest level since late February, tumbling to 381,000 after a reading at 404,000 the previous week.
In the U.K., the Bank of England kept interest rates steady at a record low 0.5%, where they have been since March 2009 and announced no change to its asset purchase program, which it increased to GBP275 billion in October.
In the week ahead, investors will be keeping a close eye on the borrowing costs of troubled euro zone states, as a rise in borrowing costs could prompt a rating cut after Standard & Poor’s warned that it may carry out a mass downgrade of 15 euro zone members, including France, Italy and Spain.
Italy and Spain are both set to auction government bonds in the coming week.
Markets will also be closely watching the Federal Reserve’s policy setting meeting on Tuesday, as concerns over the impact of the euro zone’s financial crisis on global growth continue to weigh.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, December 12
The U.S. is to publish official data on the federal budget balance.
Tuesday, December 13
The U.K. is to publish government data on consumer price inflation, which accounts for the majority of overall inflation, in addition to industry data on house price inflation, a leading indicator of strength in the housing market.
Later Tuesday, 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. In addition, the Federal Reserve is to announce its federal funds rate.
Wednesday, December 14
The U.K. is to produce government data on employment, including reports on claimant count change, the unemployment rate and average hourly earnings.
The U.S. is to produce official data on import prices and crude oil stockpiles.
Also Wednesday, the Organization of Petroleum Exporting Countries is to meet to discuss a range of issues regarding energy markets, including oil production levels.
Thursday, December 15
The U.K. is to publish official data on retail sales, as well as reports on consumer inflation expectations and industrial order expectations.
The U.S. is to release a flurry of economic data, including the weekly report on initial jobless claims and data on producer price inflation. The U.S. is also to release official data on industrial production, capacity utilization, the current account, TIC long term purchases and manufacturing activity in New York and Philadelphia regions.
Friday, December 16
The U.S. is to round up the week with official data on consumer price inflation, which accounts for the majority of overall inflation.
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