Forex - GBP/USD weekly outlook: 03-07 October 2011

Forex News – The pound was lower against the U.S. dollar on Friday, trimming the week's gains as renewed fears over the sovereign debt crisis in the euro zone prompted investors to sell riskier assets.

GBP/USD hit 1.5715 on Thursday, the pair's highest since September 21; the pair subsequently consolidated at 1.5581 by close of trade on Friday, gaining 0.65% over the week.

The pair is likely to find support at 1.5431, the low of September 26 and resistance at 1.5746, the high of September 21.

Sterling came under pressure on Friday, after an unexpected rise in euro zone inflation for September weighed on risk sentiment, as it dented hopes that the European Central Bank will cut interest rates to boost the region's economy.

Also Friday, government data showed that consumer spending in the U.S. rose 0.2% in August after a revised 0.7% increase the previous month.

The pound rose to a six-day high on Thursday, tracking the euro's gains after Germany's parliament ratified a vote to expand the power of the euro zone's bailout fund, the European Financial Stability Facility. The European Commission said the expanded rescue fund is set to be in place by mid-October.

In the U.S., data on Thursday showed that the economy grew more than previously estimated in the second quarter. In its final estimate for the quarter, the Commerce Department said gross domestic product grew at annual rate of 1.3%, up from the previously estimated 1.0%.

Meanwhile sterling was weighed by ongoing speculation that the Bank of England may implement more monetary stimulus to boost the faltering U.K. economy, ahead of its policy-setting meeting later in the week.

In the coming week, markets will be closely watching the outcome of Thursday’s policy-setting meeting by the BoE as well as developments in the euro zone. Meanwhile, Friday’s data on U.S. non-farm payrolls will also be a major focus for the week.

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

Monday, October 3

The U.K. is to release data on manufacturing sector growth, a leading indicator of economic health.

Later in the day, the U.S. Institute of Supply Management is to publish data on manufacturing activity.

Tuesday, October 4

The U.K. is to publish official data on construction spending, while Bank of England policymaker David Miles is to speak later in the day.

Later Tuesday, the U.S. is to release official data on factory orders, a leading indicator of production, while Federal Reserve Chairman Ben Bernanke is to speak in Washington.

Wednesday, October 5

The U.K. is to produce revised data on second quarter GDP, the broadest measure of economic activity and the primary gauge of the economy's health. The country is also to release data on service sector activity as well as reports on the current account and business investment.

Later in the day, the U.S. is to release a report on non-farm payrolls, compiled by payroll processing firm ADP, which leads government data by two days. Meanwhile, the ISM is to produce a report on service sector activity, a leading indicator of economic health. The country is also to release government data on crude oil inventories.

Thursday, October 6

The BoE will be announcing its benchmark interest rate.

Meanwhile, the U.S. is to release its weekly report on initial jobless claims.

Friday, October 7

The U.K. is to release government data on producer price inflation input, a leading indicator of consumer inflation.

The U.S. is to round up the week with the monthly report on non-farm payrolls, which is a leading indicator of job creation. The country is also to publish official data on the unemployment rate and average hourly earnings.