Investing.com - The pound posted strong gains against the U.S. dollar on Friday, as soft U.S. inflation data dented demand for the greenback and pushed sterling to an eight-day high.
GBP/USD hit 1.5602 on Monday, the pair’s lowest since January 25; the pair subsequently consolidated at 1.5843 by close of trade, gaining 1.09% over the week.
Cable is likely to find support at 1.5693, Friday’s low and resistance at 1.5906, the high of February 28.
The dollar weakened against the pound on Friday, after the Department of Labor said consumer price inflation rose 0.4% in February, in line with expectations, fueled largely by pricier gasoline. Core inflation rates, which are stripped of volatile food and energy prices, rose 0.1%, below expectations for a gain of 0.2%.
The soft data fuelled speculation that the Federal Reserve could maintain a policy of economic stimulus, which would dilute the greenback.
Sentiment on the greenback was further hit after industrial production numbers came in flat in February, below expectations for a 0.4% gain, while the University of Michigan’s consumer confidence index also disappointed, coming in at 74.3, below expectations for a reading of 75.7.
The greenback had strengthened earlier in the week, as investors trimmed back expectations for another round of quantitative easing from the Fed after the central bank upgraded its outlook on the economy and acknowledged the recent improvement in the labor market.
However, policymakers reiterated their intention to keep the benchmark interest rate unchanged at a record low through late 2014 and warned that risks to the economic recovery still remained.
The pound came under pressure after ratings agency Fitch placed the U.K.’s triple-A credit rating on negative outlook late Wednesday.
Fitch said that there was a slightly greater than 50% chance that the U.K.’s triple-A rating could be downgraded in the next two years, if the government eases back on implementing harsh austerity measures.
The ratings agency said that while risks arising from the debt crisis in the euro zone had lessened, the situation was not yet completely resolved and could flare up again, threatening the governments ability to stick to deficit reduction measures.
In the week ahead, the U.S. is to release a flurry of data on the housing sector, which investors will be watching closely to gauge the strength of the economic recovery. Meanwhile, the U.K.’s annual budget statement is due on Wednesday, along with the minutes of the Bank of England’s March policy meeting.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, March 19
The U.K. is to publish industry data on house price inflation, a leading indicator of the health of the housing sector.
Tuesday, March 20
The U.K. is to release official data on consumer price inflation, which accounts for a majority of overall inflation. In addition, the U.K. is to release industry data on industrial order expectations, a leading indicator of economic health.
The U.S. is to produce official data on building permits, an excellent gauge of future construction activity, as well as data on housing starts, a leading indicator of economic health. Also Tuesday, Fed Chairman Ben Bernanke is to speak at an event in Washington; his comments will be closely watched for possible indications on the future direction of monetary policy.
Wednesday, March 21
In the U.K., the Bank of England is to publish the minutes of its March monetary policy meeting, which give investors a detailed insight into current economic conditions from the bank’s perspective. The U.K. is also to publish official data on public sector borrowing, while the government’s annual budget document is to be presented in parliament.
Also Wednesday, the U.S. is to release industry data on existing home sales, a leading indicator of economic health, as well as official data on crude oil stockpiles.
Thursday, March 22
The U.K. is to produce official data on retail sales, the leading indicator of consumer spending, which accounts for the majority of overall economic activity.
The U.S. is to publish official data on initial jobless claims, a leading indicator of economic health. Also Thursday, Fed Chairman Ben Bernanke is to speak at an event in Washington; his comments will be closely watched for possible indications on the future direction of monetary policy.
Friday, March 23
The U.K. is to publish a report on consumer confidence, a leading indicator of consumer spending, as well as industry data on mortgage approvals, an important indicator of housing market demand.
The U.S. is to round up the week with official data on new home sales, a leading indicator of economic health.
GBP/USD hit 1.5602 on Monday, the pair’s lowest since January 25; the pair subsequently consolidated at 1.5843 by close of trade, gaining 1.09% over the week.
Cable is likely to find support at 1.5693, Friday’s low and resistance at 1.5906, the high of February 28.
The dollar weakened against the pound on Friday, after the Department of Labor said consumer price inflation rose 0.4% in February, in line with expectations, fueled largely by pricier gasoline. Core inflation rates, which are stripped of volatile food and energy prices, rose 0.1%, below expectations for a gain of 0.2%.
The soft data fuelled speculation that the Federal Reserve could maintain a policy of economic stimulus, which would dilute the greenback.
Sentiment on the greenback was further hit after industrial production numbers came in flat in February, below expectations for a 0.4% gain, while the University of Michigan’s consumer confidence index also disappointed, coming in at 74.3, below expectations for a reading of 75.7.
The greenback had strengthened earlier in the week, as investors trimmed back expectations for another round of quantitative easing from the Fed after the central bank upgraded its outlook on the economy and acknowledged the recent improvement in the labor market.
However, policymakers reiterated their intention to keep the benchmark interest rate unchanged at a record low through late 2014 and warned that risks to the economic recovery still remained.
The pound came under pressure after ratings agency Fitch placed the U.K.’s triple-A credit rating on negative outlook late Wednesday.
Fitch said that there was a slightly greater than 50% chance that the U.K.’s triple-A rating could be downgraded in the next two years, if the government eases back on implementing harsh austerity measures.
The ratings agency said that while risks arising from the debt crisis in the euro zone had lessened, the situation was not yet completely resolved and could flare up again, threatening the governments ability to stick to deficit reduction measures.
In the week ahead, the U.S. is to release a flurry of data on the housing sector, which investors will be watching closely to gauge the strength of the economic recovery. Meanwhile, the U.K.’s annual budget statement is due on Wednesday, along with the minutes of the Bank of England’s March policy meeting.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, March 19
The U.K. is to publish industry data on house price inflation, a leading indicator of the health of the housing sector.
Tuesday, March 20
The U.K. is to release official data on consumer price inflation, which accounts for a majority of overall inflation. In addition, the U.K. is to release industry data on industrial order expectations, a leading indicator of economic health.
The U.S. is to produce official data on building permits, an excellent gauge of future construction activity, as well as data on housing starts, a leading indicator of economic health. Also Tuesday, Fed Chairman Ben Bernanke is to speak at an event in Washington; his comments will be closely watched for possible indications on the future direction of monetary policy.
Wednesday, March 21
In the U.K., the Bank of England is to publish the minutes of its March monetary policy meeting, which give investors a detailed insight into current economic conditions from the bank’s perspective. The U.K. is also to publish official data on public sector borrowing, while the government’s annual budget document is to be presented in parliament.
Also Wednesday, the U.S. is to release industry data on existing home sales, a leading indicator of economic health, as well as official data on crude oil stockpiles.
Thursday, March 22
The U.K. is to produce official data on retail sales, the leading indicator of consumer spending, which accounts for the majority of overall economic activity.
The U.S. is to publish official data on initial jobless claims, a leading indicator of economic health. Also Thursday, Fed Chairman Ben Bernanke is to speak at an event in Washington; his comments will be closely watched for possible indications on the future direction of monetary policy.
Friday, March 23
The U.K. is to publish a report on consumer confidence, a leading indicator of consumer spending, as well as industry data on mortgage approvals, an important indicator of housing market demand.
The U.S. is to round up the week with official data on new home sales, a leading indicator of economic health.