Forexpros - Last week saw the pound fall against the U.S. dollar for a second consecutive week, dropping to a three-week low before pulling back, as Standard & Poor's downgrade of the U.S. credit rating and growing concerns over sovereign debt contagion in the euro zone weighed on risk sentiment.
GBP/USD hit 1.6110 on Thursday, the lowest since July 20; the pair subsequently consolidated at 1.6279 by close of trade on Friday, slumping 1.15% over the week.
Cable was likely to find support at 1.6110, Thursday's and a three-week low and resistance at 1.6409, Tuesday's high.
The pound came under pressure on Monday, as market sentiment was rattled after ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA after markets closed last Friday.
The ratings agency kept the rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.
The downgrade prompted investors to shun riskier assets, such as stocks and higher yielding currencies, and flock to traditional safe haven assets like the yen, Swiss franc and gold.
Cable extended losses on Tuesday, falling to a three-week low as mounting fears over the global economic recovery weighed on risk sentiment.
But the pound rebounded after the Federal Reserve pledged to keep its benchmark interest rate at an all-time low until "at least through mid-2013."
In a statement, the Fed said growth was much slower than expected and the labor market had deteriorated, underlining concerns over the U.S. economic outlook.
On Wednesday, risk appetite crumbled as fears grew that the euro zone's debt crisis could spill over to the region's banking sector, while speculation over a French sovereign debt downgrade raised concerns over the health of major French lenders, particularly Societe Generale.
Also Wednesday, the Bank of England cut its year-end growth forecast to just below 2.0% from 2.5% at the time of its May inflation report, saying that economic growth was likely to remain "sluggish" in the near term.
In its quarterly inflation report, the BOE forecast inflation to ease towards its 2% annual target by the end of 2012 and dip slightly below target in 2013.
The pound edged higher on Thursday as risk sentiment was boosted after official data showed that U.S. initial jobless claims fell to a four-month low in the preceding week.
Meanwhile, on Friday, government data showed that U.S. retail sales rose 0.5% in July, the biggest gain in four months.
However, concerns over the U.S. economic outlook remained after the University of Michigan's preliminary index of consumer sentiment plunged to a three-decade low in August.
Looking ahead to the coming week, U.S. data on consumer price inflation will be a major focus of attention, while the Bank of England is to publish the minutes of its most recent monetary policy committee meeting.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, August 15
The U.K. is to publish industry data on house price inflation, a leading indicator of the housing industry's health.
Later in the day, the U.S. is to produce official data on manufacturing activity in New York State and a report on the balance of domestic and foreign investment in the U.S.
Tuesday, August 16
The U.K. is to produce official data on consumer price inflation, which accounts for a majority of overall inflation, while the Bank of England is to publish its inflation letter.
Later in the day, the U.S. is to publish official data on building permits, an excellent gage of future construction activity, as well as data on housing starts. The U.S. is also to release data on import prices, the capacity utilization rate and industrial production, a leading indicator of economic health.
Wednesday, August 17
The U.K. is to produce government data on claimant count change, a leading indicator of economic health, as well as data on average earnings and the overall unemployment rate.
In addition, the Bank of England is to release the minutes of the most recent policy-setting meeting. The minutes give an in-depth insight into the decision on where to set interest rates.
Meanwhile, the U.S. is to publish official data on producer price inflation, a leading indicator of consumer inflation, as well as government data on crude oil stockpiles.
Thursday, August 18
The U.K. is to produce government data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity.
Later in the day, the U.S. is to publish a flurry of economic data with government reports on initial jobless claims, consumer price inflation, existing home sales, manufacturing activity in Philadelphia as well as a report on natural gas stockpiles.
Friday, August 19
The U.K. is to produce data on public sector net borrowing, which is the difference in value between spending and income for public corporations, the central government, and local governments during the previous month.