Investing.com - Investing.com - The pound dropped sharply against the U.S. dollar on Friday, hitting a one-week low after a Republican proposal to avert the fiscal cliff did not find support, reducing hopes for a budget deal before the year-end deadline.
GBP/USD hit 1.6151 on Friday; the pair's lowest since December 14; the pair subsequently consolidated at 1.6167 by close of trade, 0.02% lower for the week.
Cable is likely to find support at 1.6102, the low from December 14 and resistance at 1.6282, Friday's high.
Market players continued to monitor 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.
Doubts over whether a deal will be reached ahead of the year-end intensified late Thursday after House Speaker John Boehner pulled his so-called "Plan B" fiscal cliff option, which called for tax increases only on Americans earning USD1 million or more per year, because his Republican colleagues did not support the legislation.
The U.S. House has adjourned for the Christmas holiday, fueling speculation that policymakers will not be able to avert the fiscal cliff. 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 University of Michigan's consumer sentiment index slumped unexpectedly to a five-month low in December, possibly due to fears the U.S. will careen over the fiscal cliff.
The index dipped to 72.9 for December from 74.5 the previous month, missing analysts' call for an improvement to 74.7 this month.
Meanwhile, the U.S. Census Bureau reported that core durable goods orders, which exclude transportation items, rose 1.6% in November, defying expectations for a 0.2% decline.
Total durable goods orders rose by 0.7% last month, outpacing consensus forecasts for a 0.2% increase.
A separate Commerce Department report revealed that personal spending in the U.S. rose by 0.4% in November, beating expectations for a 0.3% rise.
Elsewhere, in the U.K., official data showed that the U.K. economy grew by a seasonally adjusted 0.9% in the third quarter, below expectations for a 1% rise.
A separate report showed that public sector net borrowing rose more-than-expected in November, rising to GBP15.3 billion from GBP6 billion the previous month. Analysts had expected public sector net borrowing to rise to GBP14.2 billion last month.
Also Friday, official data also showed that the U.K.'s current account deficit narrowed to GBP12.8 billion in the third quarter from a deficit of GBP17.4 billion, beating expectations for a drop to GBP14 billion.
Sterling climbed to a near three-month high on Wednesday after the minutes of the Bank of England's December meeting showed that the monetary policy committee was split eight-to-one, with just one member in favor of further easing, while the vote to leave interest rates unchanged at 0.5% was unanimous.
In the week ahead trading volumes are expected to remain light because many traders have closed books to lock in profit before the end of the year, reducing liquidity in the market and increasing the volatility.
Meanwhile, the U.S. is to release key reports on consumer confidence, jobless claims and home sales.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 24
U.S. equity markets will close early at 13:30EST (18:30 GMT) for the Christmas Eve holiday.
Tuesday, December 25
Markets in the U.S. and the U.K. will remain closed in observance of the Christmas Day holiday.
Wednesday, December 26
Markets in the U.K. will remain closed for the Boxing Day holiday.
Meanwhile, the U.S. is to publish industry data on house price inflation, a leading indicator of demand in the housing market. The U.S. is also to release data on manufacturing activity in Richmond.
Thursday, December 27
The U.K. is to release a report on mortgage approvals.
Meanwhile, the U.S. is to publish its weekly government report on initial jobless claims, as well as data on new home sales and consumer confidence.
Friday, December 28
The U.S. is to round up the week with data on pending home sales, as well as a report on business conditions in the Chicago area, a leading indicator of economic health. The country is also to release official data on crude oil stockpiles and natural gas inventories.
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