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Forex - GBP/USD weekly outlook: August 8 - 12

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Forexpros - Last week saw the pound fall against the U.S. dollar, dropping to a two-week low before pulling back, as concerns the U.S. economic recovery was faltering and fears that the euro zone debt crisis would spread saw risk aversion sharpen.

GBP/USD hit 1.6223 on Tuesday, the lowest since July 21; the pair subsequently consolidated at 1.6388 by close of trade on Friday, shedding 0.21% over the week.

Cable was likely to find support at 1.6223, last Tuesday's low and short-term resistance at 1.6474, the high of August 1 and a two-month high.

The pound pared its weekly decline on Friday after the U.S. Department of Labor said that nonfarm payrolls rose by 117,000 in July, above expectations for an increase of 95,000, while the previous month's figure was revised up to a gain of 46,000 from a previously reported 18,000.

The unemployment rate dipped unexpectedly to 9.1% from 9.2%, the first decline in four months.

Meanwhile, in the euro zone, the European Central Bank said it would begin buying Italian and Spanish government bonds in exchange for fiscal reforms, in an attempt to ease investors concerns over the region's ongoing debt crisis.

Yields on Italian and Spanish bonds surged to euro-lifetime highs earlier in the week, fuelling concerns that the debt crisis could spill over to the region's third and fourth largest economies.

On Thursday, the Bank of England said it kept the benchmark interest rate unchanged at 0.50% and said it was to maintain the stock of asset purchases financed by the issuance of central bank reserves at GBP200 billion.

The minutes of the meeting of the bank's monetary policy committee will be published on Wednesday, August 17.

After markets closed Friday, ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA, and kept the rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.

S&P said the debt ceiling deal reached by lawmakers to cut the federal deficit by an estimated USD2.1 trillion over a decade did not go far enough and "America's governance and policymaking is becoming less stable, less effective, and less predictable than what we previously believed."

In the week ahead, markets will get their first chance to react to the historic U.S. debt downgrade. Traders will also be paying close attention to Tuesday's Federal Reserve rate announcement and its statement on monetary policy for any hints regarding further easing.

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

Monday, August 8

The U.K. is to release industry data on retail sales and home prices.

Tuesday, August 9

The U.K. is to produce official data on manufacturing production, a leading indicator of economic health, as well as a report on its trade balance.

Later in the day, the National Institute of Economic and Social Research is to publish its monthly estimate of monthly gross domestic product, in an effort to predict the quarterly government data.

Meanwhile, the U.S. is to publish preliminary data on nonfarm productivity and labor costs, which are closely linked to consumer inflation.

In addition, the Federal Reserve is to announce the federal funds rate. The announcement will be followed by the bank's rate statement, which gives important insights into the economic conditions that influenced the rate decision.

Wednesday, August 10

Bank of England Governor Melvyn King is to hold a press conference to discuss the bank's inflation report, which contains the bank's projection for inflation and economic growth over the next two years.

Later in the day, the U.S. is to produce data on the federal budget balance as well as reports on crude oil stockpiles and wholesale inventories.

Thursday, August 11

The U.K. is to release industry data on a leading index designed to predict the direction of the economy.

Later in the day, the U.S. to publish official data on its trade balance, as well as a government report on initial jobless claims and natural gas stockpiles.

Friday, August 12

The U.S. is to round up the week with government data on retail sales, the primary gauge of consumer spending, while the University of Michigan is to produce preliminary data on consumer sentiment and inflation expectations.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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