Investing.com - The pound rose against the dollar on Friday after data showing that U.K. retail sales rose sharply in December bolstered the outlook on the economic recovery, fuelling expectations that the Bank of England may rise interest rates ahead of other central banks.
GBP/USD rose to highs of 1.6457, the strongest since January 14 and was last up 0.42% to 1.6420. For the week, the pair rose 0.20%.
Cable is likely to find support at 1.6308, Friday’s low and resistance at 1.6500.
Sterling strengthened after the Office for National Statistics said U.K. retail sales jumped 2.6% in December from a month earlier and were 5.3% higher than in the same month last year. Analysts had expected a monthly increase of 0.4% and an annual gain of 2.6%.
In the U.S., data released on Friday showed that industrial production rose 0.3% in December, in line with expectations, rising for the fifth successive month.
Another report showed that U.S. housing starts fell 9.8% last month, more than the 8.3% decline forecast by analysts. U.S. building permits rose less-than-expected in December, but remained close to November’s five year highs.
Separately, data showed that the University of Michigan's consumer sentiment index ticked down to 80.4 in January from 82.5 in December. Analysts had expected the index to rise to 83.5.
Earlier in the week, data showed that U.S. retail sales posted a larger than expected gain in December.
The data indicated that while the recovery in the U.S. remains uneven, the economic outlook is continuing to improve. The dollar has strengthened broadly since the Fed announced its decision in December to scale back its asset purchase program, cutting it by USD10 million, to USD75 billion-per-month.
The weaker euro fell to almost one year lows against sterling on Friday, with EUR/GBP dropping 1.00% to 0.8244.
Sentiment on the common currency was hit by concerns that the subdued inflation outlook may prompt the European Central Bank to ease monetary policy in order to safeguard the fragile recovery in the region.
In the week ahead, U.K. data on the unemployment rate will be closely watched, while U.S. data on jobless claims and home sales 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. The guide skips Friday as there are no relevant events on this day.
Monday, January 20
Markets in the U.S. are to remain closed for the Martin Luther King Day holiday.
Tuesday, January 21
The U.K. is to publish a private sector report on industrial order expectations.
Wednesday, January 22
The U.K. is to release official data on the change in the number of people unemployed and the unemployment rate, as well as data on average earnings and public sector borrowing. Meanwhile, the Bank of England is to publish the minutes of its most recent policy setting meeting.
Thursday, January 23
The U.S. is release the weekly report on initial jobless claims and a private sector report on existing home sales.