The pound fell to more than two-week lows against the dollar on Friday as heightened expectations for a small reduction to the Federal Reserve’s stimulus program as soon as this week bolstered dollar demand.
GBP/USD fell to 1.6261, the lowest level since November 27 and was last down 0.34% to 1.6291. For the week, the pair was down 0.78%.
Cable is likely to find support at 1.6200 and resistance at 1.6417, Thursday’s high.
The U.S. dollar strengthened after Thursday’s stronger-than-forecast U.S. retail sales data for November added to signs that the economy is improving.
The upbeat data fuelled expectations for a small reduction in the pace of the Fed’s USD85 billion-a-month asset purchase program at its upcoming policy meeting on December 17 - 18.
An agreement on a two-year U.S. budget deal was also seen as removing an obstacle to the winding back of monetary stimulus.
The pound trimmed back some losses after data on Friday showed that U.S. producer price inflation fell 0.1% in November, in line with forecasts.
The soft inflation data did little to alter expectations that the Fed will begin withdrawing stimulus in the next few months after the latest nonfarm payrolls report showed that the U.S. economy added more jobs than expected in November.
The pound’s losses were held in check after a recent series of upbeat economic data reinforced the view that the economic recovery in the U.K. is gaining traction, fuelling hopes that the Bank of England may raise interest rates ahead of other central banks.
On Tuesday, the National Institute of Economic and Social Research said the U.K. economy grew by 0.8% in the three months to November, indicating that the pace of the recovery is continuing, after the economy grew by 0.8% in the third quarter.
In the week ahead, investors will be keenly anticipating Wednesday’s outcome of the Fed’s monthly policy meeting, and a press conference with Chairman Ben Bernanke will be closely watched.
The BoE is to publish the minutes of its latest policy setting meeting, while U.K. data on consumer prices, retail sales and employment will also be in focus.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.Monday, December 16
The U.K. is to release private sector data on industrial order expectations
The U.S. is to release reports on industrial production, manufacturing activity in the New York region and the balance of foreign and domestic investment in U.S. securities.Tuesday, December 17
The U.K. is to release data on consumer price inflation, which accounts for the majority of overall inflation.
The U.S. is to release data on consumer inflation and the current account.
Wednesday, December 18
The BoE is to publish the minutes of its most recent policy setting meeting. The U.K. is to release data on the change in the number of people employed and the unemployment rate.
The U.S. is to release data on building permits, a leading indicator of future construction activity, and housing starts.
The Federal Reserve is to announce its federal funds rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. The U.S. central bank is also to publish its economic projections for the next two years. The rate announcement is to be followed by a press conference with Chairman Ben Bernanke.Thursday, December 19
The U.K. is to produce report on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
The U.S. is to publish data on existing home sales, manufacturing activity in the Philadelphia region and initial jobless claims.Friday, December 20
The U.K. is to publish revised data on third quarter GDP and reports on public sector net borrowing and the current account.
The U.S. is to round up the week with revised data on third quarter GDP.
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