Forexpros – The pound ended the week almost unchanged against the U.S. dollar on Friday, as positive moves to implement new austerity measures in Italy and Greece boosted risk sentiment.
GBP/USD hit 1.5868 on Thursday, the pair’s lowest since October 21; the pair subsequently consolidated at 1.6062 by close of trade on Friday, inching down 0.01% over the week.
The pair is likely to find support at 1.5868, the low of November 10 and resistance at 1.6165, the high of October 31.
The pound found support on Thursday, as market sentiment strengthened after Italy auctioned EUR5 billion of one-year Treasury bills at an average yield of 6.08%, the highest since September 1997, but still well below analyst expectations of 7%.
Earlier in the day, the Bank of England left interest rates unchanged at a record low of 0.5%.
Sterling extended gains on Friday, rallying to a two-day high against the greenback after Italy’s Parliament approved an amendment to the country’s 2012 budget, paving the way for the resignation of Prime Minister Silvio Berlusconi on Saturday.
Meanwhile, incoming Greek Prime Minister Lucas Papademos and his cabinet were sworn in. Papademos will implement the country’s latest EUR130 billion bailout before leading the country to early elections.
In the U.S., preliminary data showing that consumer sentiment rose to its highest level in five months this month contributed to stronger risk appetite.
The University of Michigan’s consumer sentiment index rose to a seasonally adjusted 64.2, from 60.9 in October, outstripping forecasts for an increase to 61.0.
Market sentiment was strongly hit on Wednesday, sending the pound down more than 1% against the dollar as yields on 10-year Italian bonds rose above the 7% threshold, a level widely considered unsustainable for continued borrowing.
In the week ahead, investors will continue to closely monitor developments in the euro zone as talks on the formation of an emergency government in Italy get started.
Also next week, the U.S. is to release data on retail sales, housing and inflation, while the Bank of England is to publish its quarterly inflation report.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday and Friday, as there are no relevant events on these days.
Tuesday, November 15
The U.K. is to publish official data on consumer price inflation, which accounts for a majority of overall inflation.
Also Tuesday, the U.S. is to produce a flurry of economic data with reports on retail sales, producer price inflation, business inventories and a report on manufacturing activity in New York State.
Wednesday, November 16
The U.K. is to release official data on claimant count change and the unemployment rate, leading indicators of economic health. The BoE is to publish its quarterly inflation report, which outlines the bank’s outlook for inflation over the following two years. BoE Governor Mervyn King will hold a press conference to discuss the report.
Later in the day, the U.S. is to publish data on consumer inflation, as well as data on industrial production, the capacity utilization rate, crude oil stockpiles and the balance of foreign and domestic investment in long-term securities.
Thursday, November 17
The U.K. is to produce government data on retail sales.
Also Thursday, the U.S. is to publish its weekly report on initial jobless claims, as well as data on building permits, an excellent gauge of future construction activity and housing starts. The country is also to release a report on manufacturing activity in Philadelphia, a leading indicator of economic health.
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