Forexpros – The pound ended the week close to a five-week high against the broadly weaker U.S. dollar on Friday, boosted by hopes for an agreement on a debt swap deal for Greece while weaker-than-expected economic data weighed on the dollar.
GBP/USD hit 1.5739 on Friday, the pair’s highest since December 21; the pair subsequently consolidated at 1.5727 by close of trade, gaining 1.11% over the week.
Cable is likely to find support at 1.5531, Wednesday’s low and short-term resistance at 1.5773, the high of December 21.
Risk appetite was boosted on Friday after European Union economic affairs chief Ollie Rehn said a deal on reducing Greece’s private sector debt was “imminent” and could be completed by next week.
The greenback also came under pressure after official data showed that the U.S. economy grew more slowly than expected in the fourth quarter of 2011.
The Commerce Department said U.S. gross domestic product expanded by 2.8% in the three months to December, the fastest quarterly rate in one-and-a-half years, but disappointing expectations for an increase of 3%.
Earlier in the week, Federal Reserve Chairman Ben Bernanke pushed back the timing of a possible interest rate increase until late 2014 on and indicated that the bank may embark on a third round of quantitative easing.
At the conclusion of the central bank’s policy setting meeting on Wednesday, Bernanke said that policy makers were “prepared to provide further monetary accommodation” and added that bond buying is “an option that’s certainly on the table.”
However, the pound’s gains were capped after data on Wednesday showed that the U.K. economy contracted by 0.2% in the fourth quarter.
Also Wednesday, the minutes of the Bank of England’s January policy meeting revealed that policymakers believe the economy is still facing considerable risks from the global economy, underlining expectations for further monetary easing to shore up growth.
The minutes came one day after BoE Governor Mervyn King said recent fall in inflation had given the central bank leeway to inject more stimulus into the economy and keep interest rates at record lows.
In the coming week, investors will be closely watching developments in Greece as well as the outcome of Monday’s EU summit. Investors will also be looking at U.K. data on activity in the manufacturing and service sectors for further signs that the U.K. may be heading into a recession.
In addition, the U.S. is to publish data on service and manufacturing sector growth while Friday’s data on non-farm payrolls will be an important gauge of the recovery in the labor market.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, January 30
The U.S. is to publish government data on personal consumption expenditure, a leading indicator of inflation, followed by data on personal spending, which accounts for a majority of overall economic activity.
Tuesday, January 31
The U.K. is to release a report by market research group Gfk on consumer confidence, followed by a report by the BoE on net lending to individuals.
The U.S. is to produce government data on employment cost inflation, a key gauge of consumer inflation, followed by industry data on house price inflation and the purchasing managers’ index in Chicago. The country is also to release data on consumer confidence.
Wednesday, February 1
The U.K. is to release industry data on house price inflation, as well as a report on manufacturing activity, a leading indicator of economic health.
Later Wednesday, the U.S. is to release industry data on non-farm employment change, an important indicator of consumer spending. The country is also to produce a report by the Institute for Supply Management on manufacturing activity, followed by government data on crude oil stockpiles.
Thursday, February 2
The U.K. is to produce industry data on construction sector activity, a leading indicator of economic health.
The U.S. is to produce government data on unemployment claims as well as preliminary data on nonfarm productivity and unit labor costs. Later in the day, Fed Chairman Ben Bernanke is to testify on the economic outlook and federal budget situation before the house budget committee.
Friday, February 3
The U.K. is to publish industry data on house price inflation, in addition to a report on services sector activity, a leading indicator of economic health.
The U.S. is to round up the week with official reports on non-farm employment change and the country’s unemployment rate. The country is also to release official data on average hourly earnings and factory orders, as well as a report by the Institute for Supply Management on service sector activity.
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