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Forex - GBP/USD weekly outlook: March 5 - 9

Published 03/04/2012, 10:00 AM
GBP/USD
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Investing.com - The pound fell sharply against the U.S. dollar on Friday, trimming the week’s gains as fresh concerns over the debt crisis in the euro zone weighed, while diminished expectations for fresh U.S. monetary easing also boosted the dollar.

GBP/USD hit 1.5991 on Wednesday, the pair’s highest since November 14; the pair subsequently consolidated at 1.5833 by close of trade on Friday, gaining 0.31% over the week.

Cable is likely to find short-term support at 1.5799, the low of February 28 and resistance at 1.5906, the high of the same day.

Concerns over the impact of the euro zone’s debt crisis on the region’s economy resurfaced on Friday after official data showed an unexpected drop in German retail sales in January.

Market sentiment was further hit after debt-strapped Spain raised its budget deficit target to 5.8% of gross domestic product for 2012, compared to a previous target of 4.4%.

The pound touched a three-and-a-half month high against the greenback on Wednesday, after the European Central Bank allotted EUR529.5 billion in loans to 800 lenders in its second long-term refinancing operation, boosting demand for higher-yielding assets.

However, the greenback subsequently rebounded amid concerns that the action was equivalent to quantitative easing.

The greenback also found support after Federal Reserve Chairman Ben Bernanke dampened expectations for a third round of quantitative easing, when he acknowledged the recent improvement in the U.S. labor market and said that higher oil prices could push up inflation.

The remarks came after the U.S. Commerce Department reported that gross domestic product increased at a seasonally adjusted annual rate of 3.0% during the fourth quarter, up from a preliminary estimate of 2.8%.

The pound remained supported against the euro as investors trimmed back expectations for a fresh round of easing by the Bank of England after central bank Governor Mervyn King said Wednesday that policymakers would be guided by upcoming economic data when deciding whether to implement more stimulus measures.

Meanwhile, data on Thursday showed that the manufacturing sector in the U.K. expanded in February, albeit at a slightly slower-than-forecast pace, adding to hopes that the sector will fuel overall economic growth in the first quarter.

In the week ahead, investors will be looking ahead to Friday’s data on U.S. non-farm payrolls, to gauge the strength of the country’s economic recovery. Market participants will also be continuing to watch developments in Europe, ahead of interest rate announcements by the ECB and the BoE on Thursday.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, March 5

The U.K. is to release data on service sector growth, a leading indicator of economic health.

Later Monday, the U.S. is to produce government data on factory orders, while the Institute of Supply Management is to release a report on service sector growth.

Tuesday, March 6

The U.K. is to publish industry data on retail sales, an important indicator of consumer spending.

Wednesday, March 7

The U.S. is to publish a report on ADP non-farm payrolls, which leads government data by two days. The country is also to release revised data on non-farm productivity and labor costs, which are important inflationary indicators, as well as a report on crude oil stockpiles.

Thursday, March 8

In the U.K., the BoE is to announce its benchmark interest rate.

Meanwhile, the U.S. is to produce government data on initial jobless claims, a leading indicator of economic health.

Friday, March 9

The U.K. is to publish government data on manufacturing and industrial production, as well as reports on producer price inflation input and consumer inflation expectations. Later in the day, the National Institute of Economic and Social Research is to release its monthly GDP estimate.

The U.S. is to round up the week with government data on non-farm payrolls and the unemployment rate, leading indicators of economic health, in addition to data on the trade balance and average hourly earnings.


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