Forexpros – The pound rose to a three-day high against the U.S. dollar on Friday, paring some of the week’s losses as risk sentiment strengthened amid new hopes of progress in tackling the euro zone’s debt crisis.
GBP/USD hit 1.5408 on Wednesday, the pair’s lowest since October 6; the pair subsequently consolidated at 1.5543 by close of trade on Friday, shedding 0.70% over the week.
Cable is likely to find support at 1.5408, the low of December 14 and resistance at 1.5628, the high of December 13.
The pound found support after European Union leaders unveiled a new agreement to tighten fiscal rules in the euro zone, in order to strengthen economic integration and tackle the region’s financial crisis.
Although the U.K. was the only European Union member to veto changes to the EU treaty at the December 9 summit, the country will be allowed to follow discussions on the new fiscal agreement as an “observer” on Tuesday.
Also Friday, the head of the euro zone’s bailout fund, the European Financial Stability Facility, announced that around EUR600 billion are available to fight the region’s debt crisis, a greater amount than Italy and Spain’s combined funding needs for 2012, and more will be provided in March if needed.
Market sentiment was also boosted after Thursday’s broadly better-than-expected U.S. data on employment and manufacturing.
The U.S. Department of Labor said that the number of individuals filing for initial jobless benefits last week fell to a three-year low of 366,000.
Data also showed that the New York Federal Reserve’s index of manufacturing conditions jumped to a seven-month high in December, while the Philadelphia Federal Reserve’s index of manufacturing conditions doubled expectations with a reading at 10.3.
In the U.K., official data showed that the number of people claiming unemployment benefits rose less-than-expected in December, advancing by 3,000 after a rise of 2,500 the previous month.
The report also showed that the U.K. unemployment rate remained unchanged at 8.3%, despite expectations for a rise to 8.4%.
Earlier in the week, the Fed warned that market turbulence stemming from the crisis in the euro zone posed a threat to the U.S. economy but stopped short of indicating further stimulus measures, sending the greenback broadly higher.
In the week ahead investors will be keeping a close watch on Tuesday’s report on German business climate, to assess the impact of the debt crisis on the region’s largest economy.
Meanwhile, the U.S. is to release key reports on the housing sector, durable goods and jobless claims, while the Bank of England is to release the minutes of its latest policy meeting.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, December 19
The U.K. is to publish industry data on house price inflation, a leading indicator of the housing industry’s health. Meanwhile, the Bank of England is to release its quarterly bulletin.
Tuesday, December 20
The U.K. is to produce two separate reports on consumer confidence, a leading indicator of consumer spending, as well as industry data on retail sales.
Later Tuesday, 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.
Wednesday, December 21
In the U.K., the BoE is to release the minutes of its most recent policy setting meeting, which contain insights on current economic conditions from the bank’s perspective. The bank is also to produce data on public sector net borrowing.
Also Wednesday, the U.S. is to produce industry data on existing home sales, a leading indicator of economic health, as well as data on crude oil stockpiles and the treasury currency report.
Thursday, December 22
The U.K. is to publish official data on the current account, as well as revised data on third quarter GDP growth.
The U.S. is to publish its weekly report on initial jobless claims, a leading indicator of economic health. The country is also to produce revised data on third quarter GDP, while the University of Michigan is to release revised data on consumer sentiment and inflation expectations.
Friday, December 23
The U.K. is to release industry data on mortgage approvals, a leading indicator of housing market demand.
The U.S. is to round up the week with official data on durable goods orders, a leading indicator of production as well as data on personal spending income, personal spending and new home sales.
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