The pound slipped lower against the dollar on Friday after the president of the St. Louis Federal Reserve indicated that the U.S. central bank could start to taper its stimulus program in October.
GBP/USD hit session lows of 1.5985 on Friday before settling at 1.6005, 0.17% lower for the day, after rising to eight-month highs of 1.6158 on Wednesday. For the week, the pair ended 0.65% higher.
Cable is likely to find support at 1.5891, Wednesday’s low and resistance at 1.6158.
The greenback found support after St. Louis Fed President James Bullard said the decision not to taper in September was “close” and did not rule out a small reduction in the central bank's bond purchases in October.
The comments came during an interview with Bloomberg television.
The greenback hit eight-month lows against sterling after the Federal Reserve said Wednesday that it wanted to see more evidence of a sustained economic recovery before it adjusted the scale of its bond buying program.
The announcement surprised markets, which had been expecting the Fed to cut its USD85 billion-a-month stimulus program by USD10 billion to USD15 billion.
In a press conference following the Fed statement, Chairman Ben Bernanke reiterated that the plan to taper asset purchases was never a "preset course," and added that the bank's decision was dependent on how the economic recovery continues to progress.
The central bank also revised down its outlook for growth this year to a range of 2% to 2.3%, from its June forecast for 2.3% to 2.6% growth.
The pound turned lower on Thursday after data showed that U.K. retail sales unexpectedly fell 0.9% in August, compared to expectations for a 0.4% increase. U.K. retail sales were up 2.1% on a year-over-year basis, falling short of expectations for a 3.3% gain.
Data on Friday showed that the U.K. public deficit decreased to GBP13.16 billion in August, from GBP14.41 a year earlier.
In the week ahead, uncertainty over the direction of Federal Reserve policy and the decision over Chairman Ben Bernanke’s eventual successor look likely to weigh on the dollar.
Investors will be closely watching U.S. data on consumer confidence and durable goods orders in an attempt to gauge the strength of the economic recovery.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday as there are no relevant events on this day.
Tuesday, September 24
The U.K. is to release industry data on mortgage approvals, an important indicator of demand in the housing market.
The U.S. is to release private sector data on house price inflation, as well as a closely watched report on consumer confidence.
Wednesday, September 25
The U.K. is to produce private sector data on retail sales.
The U.S. is to release data on durable goods orders, a leading indicator of production, in addition to a report on new home sales.
Thursday, September 26
The U.K. is to produce a report on the current account, as well as revised data on second quarter economic growth.
The U.S. is to release the weekly report on initial jobless claims, as well as final data on second quarter growth and private sector data on pending home sales.
Friday, September 27
The U.S. is to round up the week with revised data on consumer sentiment and inflation expectations from the University of Michigan, as well as data on personal income and expenditure.
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