Forexpros – The pound ended fell to a seven-week low against the U.S. dollar on Friday, as sustained concerns over debt contagion in the euro zone weighed on demand for riskier assets.
GBP/USD hit 1.5423 on Friday, the pair’s lowest since October 7; the pair subsequently consolidated at 1.5437, plunging 2.23% over the week.
Cable is likely to find support at 1.5339, the low of October 4 and resistance at 1.5566, the high of November 24.
The pound dropped against the greenback on Wednesday as risk sentiment weakened after Germany, the euro zone’s largest economy, missed its EUR6 billion sales target at an auction of 10-year bonds, in its least successful debt sale since the launch of the single currency.
The poorly received auction was due in some part to low bond yields but sparked concerns that the debt crisis may have started affecting the euro zone’s largest economy.
Meanwhile, ratings agency Fitch warned that France could lose its triple-A credit rating if European Union leaders fail to take action to prevent the crisis from worsening.
Investors remained jittery after German Chancellor Angel Merkel reiterated on Thursday her belief that joint euro zone bonds would remove incentives for individual states to improve their fiscal discipline and rejected calls for an expanded role for the ECB in fighting the debt crisis.
Also Thursday, revised data showed that the U.K.’s gross domestic product expanded by 0.5% in the third quarter and was up 0.5% on the year, in line with initial estimates earlier this month and with economists’ forecasts.
Sterling extended losses against the dollar on Friday, after Italian 10-year bond yields climbed to near unsustainable levels, rising above 7% even as the European Central Bank bought bonds in the secondary market.
The rise in Italian borrowing costs came after a disappointing auction of Italian government debt and fanned fears that the debt crisis in the region is deepening.
The pound was also under pressure after a senior Bank of England policymaker said there was strong case for more quantitative easing once the current round of asset purchases was complete.
Earlier in the week, the U.S. super-committee created to cut the country’s deficit said that it failed to reach a deal, signaling that several tax programs, including a payroll-tax holiday, risk expiring at the beginning of next year. Still, ratings agency Standard & Poor’s reaffirmed it would keep the U.S.’s credit rating at AA+ after stripping the government of its top AAA grade on August 5.
In the week ahead, investors will be eyeing an auction of Belgian government debt on Monday after ratings agency Standard & Poor’s downgraded its rating on Belgium by one notch on Friday.
Meanwhile, euro zone finance ministers are to meet Wednesday to discuss details on leveraging the region’s bailout fund, although a major announcement is unlikely.
Also next week, the U.S. is to release its closely watched report on non-farm payrolls, while the U.K. is to publish the Treasury’s annual forecast statement.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, November 28
The U.K. is to publish industry data on retail sales, an important indicator of economic health.
Also Monday, the U.S. is to release official data on new home sales, a leading indicator of economic health.
Tuesday, November 29
The U.K. is to publish industry data on house price inflation, while the Bank of England is to release data on net lending to individuals, M4 money supply and mortgage approvals. Meanwhile, the Treasury is to publish its annual forecast statement, which previews the government’s budget for the coming year.
The U.S. is to release industry data on house price inflation as well as a report on consumer confidence, a leading indicator of consumer spending.
Wednesday, November 30
The U.K. is to publish data on consumer confidence, a leading indicator of consumer spending.
Later in the day, the U.S. is to release a closely watched report on non-farm payrolls compiled by payroll processing firm ADP, which leads government data by two days. The U.S. is also to release data on manufacturing activity in the Chicago area as well as government reports on pending home sales, non-farm productivity, labor costs and crude oil stockpiles.
Thursday, December 1
The U.K. is to publish data on manufacturing activity, a leading indicator of economic health.
Also Thursday, the U.S. is to release its weekly report on initial jobless claims, while the Institute of Supply Management is to release data on manufacturing activity.
Friday, December 2
The U.K. is to publish data on construction sector activity, a leading indicator of economic health.
The U.S. is to round up the week with a closely watched government report on non-farm employment change, a leading indicator of economic health, as well as data on average hourly earnings and the unemployment rate.
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