Investing.com - The pound ended the week lower against the broadly stronger dollar on Friday as indications that the U.S. recovery is gaining momentum and increased risk aversion underpinned dollar demand.
GBP/USD fell to lows of 1.6429, the weakest since January 21 and was last down 0.29% to 1.6434. For the week, the pair lost 0.83%.
Cable is likely to find support at 1.6325 and resistance at 1.6566, Thursday’s high.
The dollar strengthened broadly on Friday as the selloff in emerging markets prompted a broad based flight to safety, with investors fleeing equities, bonds and currencies perceived as risky.
Emerging markets have been hard hit by a combination of concerns over the impact of cuts to the Federal Reserve’s stimulus program and fears over a possible slowdown in China. The Turkish lira and the South African rand tumbled after surprise rate hikes did little to shore up the currencies.
On Wednesday the Fed said it would scale back its monthly asset purchase program by another $10 billion to $65 billion, citing improvements in the labor market.
Data released on Friday showed that U.S. consumer spending rose 0.4% in December, above expectations for an increase of 0.2%.
A separate report showed that the University of Michigan’s consumer sentiment index ticked down to 81.2 in January from 82.5 in December, but was better than the preliminary reading of 80.4 and forecasts for a reading of 81.0.
The reports came one day after data showed that the U.S. economy grew 3.2% in the fourth quarter, in line with expectations.
The data fuelled hopes that the recovery in the world’s largest economy could withstand reductions to the Federal Reserve’s asset purchase program and turmoil in emerging markets.
Earlier in the week, data showed that the U.K. economy grew 0.7% in the final three months of 2013, in line with expectations and slightly down from growth of 0.8% in the previous quarter. On a year-over-year basis the economy expanded 2.8%.
On an annual basis, U.K. gross domestic product was 1.9% in 2013, up from just 0.3% the previous year, the fastest annual rate of growth since 2007.
In the week ahead, investors will be keenly anticipating Friday’s U.S. nonfarm payrolls report for January after December’s report showed that the economy added far fewer jobs than expected.
Thursday’s rate decision by the Bank of England and U.K. data on service sector activity 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, February 3
The U.K. is also to publish data on manufacturing activity, a leading indicator of economic health.
In the U.S., the Institute of Supply Management is to produce data on manufacturing activity, a leading economic indicator.
Tuesday, February 4
The U.K. is to publish data on construction sector activity, a leading economic indicator.
The U.S. is to produce data on factory orders, a leading indicator of production.
Wednesday, February 5
The U.K. is also to release data on service sector activity, a leading economic indicator.
The U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. Meanwhile, the ISM is to publish a report service sector activity.
Thursday, February 6
The BoE is to announce its benchmark interest rate.
The U.S. is to publish the weekly report on initial jobless claims as well as data on the trade balance.
Friday, February 7
The U.K. is to produce data on manufacturing and industrial production, as well as a report on the trade balance.
The U.S. is to round up the week with the closely watched government data on nonfarm payrolls and the unemployment rate.