Forexpros – The pound rallied against the U.S. dollar on Friday, after the Bank of England announced measures to insulate the U.K. economy from the effects of the crisis in the euro zone, while speculation over more monetary easing weighed on the greenback.
GBP/USD hit 1.5475 on Friday, the session low; the pair subsequently consolidated at 1.5706 by close of trade, up 1.26% on the week.
Cable was likely to find support at 1.5475, Friday’s low and resistance at 1.5847, the high of May 2.
The pound came under pressure earlier Friday, after the Bank of England announced an emergency liquidity package to support the U.K. banking system, but erased losses as U.K. bank stocks turned higher following the news.
The announcement came one day after the European Central Bank said it would continue to supply liquidity to banks to stabilize markets in the event of turmoil on Monday, following Sunday’s elections in Greece, which could determine if the country remains in the euro zone.
Meanwhile, concerns over elevated Spanish and Italian borrowing costs lingered on Friday, despite efforts to cushion Madrid from the effects of the ongoing sovereign debt crisis by agreeing on a EUR100 billion aid package for Spanish banks.
The yield on Spanish 10-year bonds eased back to settle at 6.87% on Friday, but remained close to the critical 7% threshold which prompted bailouts in Greece, Ireland and Portugal.
Sentiment on the greenback was weighed by growing expectations that the U.S. central bank may announce fresh stimulus measures following its meeting next week, after a recent string of weak economic data.
Data on Friday showed that U.S. consumer sentiment fell to a six-month low in June, fuelling concerns that economic growth is faltering. Separate reports showed that an index of manufacturing activity in New York dropped sharply in June, while U.S. manufacturing output fell in May for the second time in three months.
In the week ahead, investor sentiment is likely to be decided by the outcome of Sunday’s elections in Greece, while a G-20 summit due to start Monday may produce fresh measures to combat the crisis in Europe.
Meanwhile, market participants will be closely watching the outcome of the Federal Reserve’s monetary policy meeting on Wednesday, as well as U.K. data on inflation and retail sales amid speculation over whether the BoE will announce more monetary easing.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets. The guide skips Friday, as there are no relevant events on this day.
Monday, June 18
The U.K. is to publish an industry report on house price inflation, a key indicator of the housing industry’s health.
Also Monday, leaders from the Group of 20 nations are to begin a two-day summit in Mexico.
Tuesday, June 19
The U.K. is to publish official data on data on consumer price inflation, which accounts for the majority of overall inflation, followed by a report on consumer confidence.
The U.S. is to publish official reports on building permits, an excellent gauge of future construction activity, as well as data housing starts, a leading indicator of economic health.
Meanwhile, leaders from the Group of 20 nations are to hold a second day of talks at a
Wednesday, June 20
The U.K. is to publish official data on claimant count change and the unemployment rate, while the BoE is also to publish the minutes of its June policy-setting meeting.
Later Wednesday, the Federal Reserve is to announce its benchmark interest rate and publish its rate statement and economic projections. The data is to be followed by a press conference with Fed Chairman Ben Bernanke to discuss the monetary policy decision. The U.S. is also to release government data on crude oil stockpiles
Thursday, June 21
The U.K. is to publish official data on retail sales, the primary gauge of consumer spending, and industry data on industrial order expectations.
The U.S. is to produce government data on unemployment claims, followed by preliminary data on manufacturing activity and an industry report on existing home sales. The country is also to release data on manufacturing activity in the Philadelphia area.
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