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Forex - GBP/USD weekly outlook: March 18 - 22

By: Investing.com
Posted: 3/17/2013 12:44:00 PM
Referenced Stocks:

Investing.com - The pound was higher against the dollar on Friday following comments by Bank of England Governor Mervyn King, while U.S. inflation data indicated that the Federal Reserve had sufficient scope to continue its asset purchase program.

GBP/USD hit a session high of 1.5176 on Friday; the pair's highest since March 5, before settling at 1.5111, 0.19% higher for the day and 1.36% higher for the week.

Cable was likely to find support at 1.4914, Thursday's low and resistance at 1.5197, the high of March 5.

The dollar turned broadly lower after the Labor Department reported that U.S. consumer price inflation rose 0.7% in February, bringing the annualized rate of consumer inflation to 2.0%.

Core consumer prices, which exclude volatile food and energy costs, also rose 2% year-on-year.

In December, the U.S. central bank said an "exceptionally low" target interest rate is appropriate as long as inflation isn't forecast to rise to more than 2.5%.

Sentiment on the dollar was also hit after data showed that the University of Michigan's consumer sentiment index dropped to 71.8 in March, the lowest level since December 2011, from a final reading of 77.6 in February.

The disappointing data sparked profit taking ahead of an upcoming Federal Reserve policy meeting after a recent string of strong U.S. economic data reinforced optimism over the country's economic recovery and saw the dollar strengthen across the board.

The pound found support after BoE Governor Mervyn King said the recent sharp fall in sterling had gone far enough, adding the pound was now 'properly valued' and that an economic recovery 'was in sight'.

The pound fell to three-and-a-half year lows against the dollar earlier in the week after data showed that manufacturing output in the U.K. posted the steepest drop since June in January, underlining concerns over the risk of a triple-dip recession and more easing by the BoE.

In the week ahead investors will be focusing on Wednesday's Federal Reserve policy statement, amid speculation over an earlier-than-expected end to the bank's asset purchase program. Fed Chairman Ben Bernanke is to give a press conference after the release of the policy statement.

Investors will also be awaiting minutes from the BoE's March meeting and the U.K. government's annual budget statement. The minutes of the bank's February meeting indicated that three policymakers including Governor King voted in favor of more easing.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday and Friday as there are no relevant events on these days.

Tuesday, March 19

The U.K. is to publish official data on consumer price inflation, which accounts for the majority of overall inflation and data on the producer price index and the retail price index.

Later Tuesday, the U.S. is to release official data on building permits, a leading indicator of future construction activity, and data on housing starts.

Wednesday, March 20

The U.K. is to release government data on the change in the number of people employed and the unemployment rate, a leading economic indicator.

Meanwhile, the BoE is to publish the minutes of its February meeting and the U.K. government is to unveil its annual budget statement.

In the U.S., the Federal Reserve is to announce the federal funds rate and release its rate statement and quarterly economic projections. The announcement is to be followed by a press conference with Fed Chairman Ben Bernanke to discuss monetary policy and the economic outlook.

Thursday, March 21

The U.K. is to release official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. The country is also to release official data on public sector net borrowing and private sector data on industrial order expectations.

The U.S. is to release the weekly government report on initial jobless claims, as well as industry data on existing home sales and official data on manufacturing activity in Philadelphia.



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