Forex - GBP/USD weekly outlook: January 7 - 11

Shutterstock photo - The pound fell to a one-month low against the U.S. dollar on Friday, after a shock contraction in the U.K.'s service sector in December fuelled fears that the economy slipped back into a recession in the final quarter of 2012.

GBP/USD hit 1.6008 on Friday, the pair's lowest since December 7; the pair subsequently consolidated at 1.6066 by close of trade, down 1.02% for the week.

Cable is likely to find support at 1.6001, the low of December 7 and resistance at 1.6107, Friday's high.

Sterling hit session lows against the dollar after the Markit U.K. services purchasing managers' index came in at 48.9 in December, the lowest level since April 2009, from 50.2 the previous month, confounding expectations for a small increase to 50.4.

Markit said the figures, along with mixed manufacturing and construction figures earlier in the week, indicated that the U.K. economy contracted by 0.2% in the fourth quarter.

Following the poor data economists at Citi bank warned that the U.K. could lose its triple-A sovereign rating in 2013.

A separate report showed that U.K. mortgage approvals increased to 54,036, in November, up from 53,071 the previous month.

But the pound trimmed losses against the greenback after the closely watched report on U.S. nonfarm payrolls indicated that the recovery in the labor market may be moderating.

The U.S. Department of Labor said the economy added 155,000 jobs in December, slightly higher than forecasts for an increase of 150,000, but easing from an upwardly revised increase of 161,000 in November. The unemployment rate held steady at 7.8%.

Sterling was sharply lower against the dollar on Thursday after the minutes of the Federal Reserve's December policy meeting showed that some policymakers considered an earlier-than-expected end to the bank's quantitative easing program.

The Fed's December minutes said also interest rates would remain close to zero "at least as long" as the jobless rate remains above 6.5%.

Investors remained cautious as relief over an agreement to avoid the U.S. fiscal cliff was offset by concerns about continuing political wrangling over further spending cuts and raising the U.S. debt ceiling.

In the week ahead, investors are likely to remain focused on U.S. fiscal negotiations, while monetary policy decisions by the Bank of England and the European Central Bank will also be in focus.

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

Monday, January 7

The U.K. is to publish an industry report on house price inflation, a leading indicator of demand in the sector.

Tuesday, January 8

The U.S. is to release private sector data on economic optimism, as well as official data on consumer credit, which is closely linked to consumer spending.

Wednesday, January 9

The U.K. is to release official data on the trade balance, the difference in value between imports and exports.

The U.S. is to publish official data on crude oil inventories, while the U.S. Treasury is to hold an auction of 10-year government bonds.

Thursday, January 10

The BoE is to announce its benchmark interest rate, while the U.S. is to publish the weekly government report on initial jobless claims.

Friday, January 11

The U.K. is to produce official data on manufacturing production, a leading indicator of economic health.

The U.S. is to round up the week with the government's report on the trade balance, the difference in value between imports and exports. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.

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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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