Forexpros – The pound ended the week sharply lower against the U.S. dollar on Friday, as comments by the Bank of England sparked fresh concerns over the outlook for U.K. economic growth, while lowered expectations for easing by the Federal Reserve supported the greenback.
GBP/USD hit 1.5459 on Friday, the pair’s lowest since June 12; the pair subsequently consolidated at 1.5485 by close of trade on Friday, tumbling 1.32% over the week.
The pair is likely to find support at 1.5428, the low of June 7 and resistance at 1.5562, the high of June 14.
The greenback rose broadly after the U.S. Bureau of Labor Statistics said on Friday that the economy added 80,000 jobs in June, below market forecasts for a gain of around 90,000.
April figures were revised to 68,000 from 77,000 jobs, while May’s numbers were revised to 77,000 from 69,000.
Although the data was weaker than expected, many investors said it was not bad enough to spur the Federal Reserve to launch a third round of quantitative easing.
The report also showed that the U.S. unemployment rate held steady at 8.2% in June, in line with expectations.
Meanwhile, sterling remained under pressure after the BoE said on Thursday that, “The weaker outlook for U.K. output growth means that the margin of economic slack is likely to be greater and more persistent.”
The comments came after BoE policymakers voted to increase the stock of asset purchases financed by the issuance of central bank reserves by GBP50 billion to GBP375 billion, in order to shield the recession hit U.K. economy from the ongoing debt crisis in the euro zone.
The bank also left the benchmark interest rate unchanged at 0.5%, where it’s stood since March 2009, in a widely expected move.
Data released earlier in the week showed that service sector activity in the U.K. expanded at the slowest rate in eight months in June, while construction activity in the U.K. fell at the fastest rate in two-and-a-half years last month.
A separate report showed that the manufacturing sector contracted for a second successive month in June.
Risk sentiment was also weighed as a series of stimulus measures announced by world central banks sparked fresh concerns over the outlook for global economic growth.
European Central Bank President Mario Draghi said on Thursday that the economic outlook faces downside risks, adding that indicators for the second quarter point to weakening growth in the euro zone.
The comments came after the central bank cut its benchmark interest rate to a record low 0.75% in July, in a bid to bolster faltering growth in the region.
Elsewhere, China surprised traders by cutting interest rates for the second time in less than a month on Thursday, signaling that growth is slowing more than Beijing expected.
In the week ahead, investors will be closely watching ECB President Draghi’s testimony before the European Parliament, on Monday, as well as a two-day meeting of euro zone finance ministers, amid expectations for a final agreement on aid for Spanish banks.
Markets will also be eyeing the minutes of the Fed’s latest policy meeting as well as U.S. data on trade balance and unemployment claims.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, July 9
Euro zone finance ministers are to meet in Brussels for a first day of talks.
Tuesday, July 10
The U.K. is to produce industry data on retail sales as well as on house price balance, a leading indicator of housing inflation, followed by official reports on manufacturing production and trade balance, the difference in value between imported and exported goods. The country is also to release preliminary data on second quarter economic growth, later in the day.
Meanwhile, euro zone finance ministers are to hold a second day of talks in Brussels.
Wednesday, July 11
The U.S. is to release official data on trade balance and crude oil stockpiles, followed by the minutes of the Federal Reserve’s most recent policy-setting meeting. The minutes will be closely watched for signs of future monetary policy decisions by the central bank.
Thursday, July 12
The U.K. is to hold a 10-year government bond auction.
The U.S. is to publish government data on unemployment claims and official data on import prices, followed by the monthly Treasury statement.
Friday, July 13
The U.S. is to round up the week with government data on producer price inflation and a preliminary report by the University of Michigan on consumer sentiment.
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