Investing.com - The pound edged higher against the U.S. dollar
on Friday, but gains were limited as sentiment turned cautious amid
ongoing uncertainty surrounding talks to avert the looming fiscal
cliff in the U.S.
GBP/USD hit 1.6065 on Thursday; the pair's lowest since December
10; the pair subsequently consolidated at 1.6157 by close of trade,
0.06% lower for the week.
Cable is likely to find support at 1.6065, Thursday's low and
resistance at 1.6201, Thursday's high.
Trading volumes were thin as many investors already closed books to
lock in profit before the end of the year, reducing liquidity in
the market and increasing the volatility.
Market players remained focused on developments surrounding the
fiscal cliff in the U.S., approximately USD600 billion in automatic
tax hikes and spending cuts due to come into effect on January 1
unless Democrats and Republicans agree how to cut the deficit.
U.S. President Barack Obama met with congressional leaders at the
White House Friday afternoon, but both sides failed to reach an
agreement ahead of the looming year-end deadline.
The gathering included House Speaker John Boehner and Senate
Minority Leader Mitch McConnell, both Republicans, as well as
Senate Majority Leader Harry Reid and House Minority Leader Nancy
Pelosi, both Democrats.
The House of Representatives is due to return to Washington on
Sunday. The Senate will be in Sunday as well to try to reach a
last-ditch agreement.
Without a deal, the U.S. could fall back into recession and drag
much of the world down with it.
On the data front, the National Association of Realtors said Friday
that U.S. pending home sales rose 1.7% in November, above
expectations for a 1% increase.
A separate report showed that Chicago's purchasing managers' index
rose to 51.6 in December, from a reading of 50.4 the previous
month, beating expectations for a rise to 51.0.
Elsewhere, in the euro zone, Italy saw borrowing costs edge higher
at an auction of five- and- ten-year government bonds, amid
uncertainty ahead of national elections in February.
Rome sold EUR3 billion of 10-year bonds at an average yield of
4.48%, up from 4.45% last month. The country also auctioned EUR2.87
billion of five-year debt at a yield of 3.26%, compared to 3.23% a
month earlier.
Meanwhile, revised data showed that France's economy grew by a
meager 0.1% in the third quarter, down from an initial estimate for
growth of 0.2%. The euro zone's second largest economy shrank 0.1%
in the second quarter, unchanged from the previous estimate.
In the week ahead trading volumes are expected to remain light,
with many markets closed for the New Year's holiday.
Meanwhile, U.S. is to publish its closely-watched monthly jobs
report on Friday, as investors attempt to gauge the strength of the
country's economic recovery.
Monday, December 31
The Bank of England is to produce data on housing equity
withdrawals, which measures the change in the total value of new
home-secured loans that are not used for home purchases or
improvements.
Tuesday, January 1
Markets in the U.S. and the U.K. will remain closed in observance
of New Year's Day.
Wednesday, January 2
The U.K. is also to release data on manufacturing activity, a
leading indicator of economic health.
Later in the day, the Institute of Supply Management is to produce
a report on manufacturing growth in the U.S.
Thursday, January 3
The U.K. is to produce data on construction sector activity, a
leading indicator of economic health. The country is also to
release industry data on house prices.
Later Thursday, the U.S. is to release a report on ADP nonfarm
payrolls, as well as its weekly government report on initial
jobless claims. In addition, the Federal Reserve is to publish the
minutes of its most recent policy-setting meeting.
Friday, January 4
The U.K. is to publish data on service sector activity, a leading
indicator of economic health, as well as a report on net lending to
individuals.
The U.S. is to round up the week with official data on nonfarm
payrolls, the foremost gauge of job creation, as well as data on
the overall unemployment rate.
The country is also to release official data on factory orders,
crude oil stockpiles and natural gas inventories. In addition, the
ISM is to produce a report on service sector activity.
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