GBP/USD hit 1.5911 on Thursday, the pair’s highest since May 16; the pair subsequently consolidated at 1.5807 by close of trade on Friday, 0.65% higher on the week.
Cable is likely to find support at 1.5701, the low of August 21 and resistance at 1.5911, Thursday’s high and a three-month high.
Official data showed that the U.K. economy contracted by 0.5% in the three months to June, slightly better than the initially estimated 0.7% contraction, but the report indicated that broad economic weakness still remained.
The data underlined concerns over the outlook for the U.K. economy and kept alive expectations for another round of quantitative easing by the Bank of England.
The dollar came under broad selling pressure after Wednesday’s minutes of the Federal Reserve’s August meeting showed that many policymakers think additional easing may be warranted "fairly soon" unless there is evidence of a "substantial and sustainable" strengthening in the economic recovery.
The pound had found support earlier in the week, rising to a three month high against the greenback on Thursday, as expectations mounted that the European Central Bank will implement policy measures to help stabilize the euro zone's sovereign debt markets at it next policy meeting in early September.
But market sentiment was hit on Friday after German Chancellor Angela Merkel rejected Greek pleas for an extension to its economic reform program, following talks with Greek Prime Minister Antonis Samaras on Friday.
Chancellor Merkel said it was up to Greece to show that it could implement the austerity measures agreed with its international creditors, but reiterated that the country should stay in the euro zone.
In the coming week investors will be looking ahead to a speech by Federal Reserve Chairman Ben Bernanke at an annual symposium in Jackson Hole, Wyoming at the end of the week, amid ongoing speculation over how close the U.S. central bank is to implementing more stimulus measures.
In addition, the U.S. is to release revised data on second quarter economic growth, while Italy is to hold an auction of 10-year governments bonds, in what will be an important test of investor appetite for the country’s debt.
Ahead of the coming week, forex trading outlook has compiled a list of these and other significant events likely to affect the markets.
Monday, August 27 2012
Markets in the U.K. are to remain closed for a bank holiday.
Tuesday, August 28 2012
The U.K. is to release industry data on house price inflation, an important indicator of demand in the housing market.
Later in the day, the U.S. is to release a report on consumer confidence, a leading indicator of economic health, as well as industry data on house price inflation.
Wednesday, August 29 2012
The U.S. is to produce revised data on second quarter GDP, the broadest measure of economic activity and the primary gauge of the economy's health. The country is also to release industry data on pending home sales, as well as official data on crude oil stockpiles and the Federal Reserve’s Beige Book.
Thursday, August 30 2012
The BoE is to publish a report on net lending to individuals, which is closely linked to consumer spending.
The U.S. is to produce official data on personal consumption expenditures and personal spending. In addition, the annual economic symposium in Jackson Hole, Wyoming is set to begin.
Friday, August 31 2012
The U.K. is to release a report on consumer confidence, an important indicator of economic health.
The U.S. is to round up the week with a report on Chicago’s purchasing managers’ index as well as revised data by the University of Michigan on consumer sentiment, as well as official data on factory orders.
Meanwhile, Federal Reserve Chairman Ben Bernanke is scheduled to speak at the Jackson Hole Symposium; his comments will be closely watched for any indications on the future possible direction of monetary policy.
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