Forex - GBP/USD weekly outlook: December 23 - 27

Investing.com - The pound moved lower against the dollar on Friday, after data revealed the U.S. economy expanded faster than expected in the third quarter, though similarly healthy data out of the U.K. curbed the pair's losses.

GBP/USD fell to a daily low of 1.6316 on Friday, before settling at 1.6329, down 0.27% for the day. For the week, the pair advanced 0.23%.

Cable is likely to find support at 1.6271, the low from December 17 and resistance at 1.6484, the high from December 18.

The Commerce Department reported Friday that the U.S. economy expanded by 4.1% in the third quarter, well above initial estimates for 3.6% growth, adding to signs that the economic recovery is deepening.

News the Federal Reserve will begin scaling back its stimulus program continued to support demand for the greenback.

The Fed said Wednesday that it would reduce its USD85 billion-a-month bond buying program by USD10 billion in January, amid indications of an improving U.S. economy.

The U.S. central bank reiterated that interest rates are likely to remain low even after the unemployment rate drops below 6.5%, the threshold at which the Fed has previously said it would start to consider rate increases.

Meanwhile, across the Atlantic, official data on Friday showed that the U.K. economy grew by 0.8% in the third quarter, in line with previous estimates.

A separate report revealed that the U.K. current-account deficit widened to GBP20.7 billion in the third quarter from GBP6.2 billion in the three months to June. Analysts were expecting the current account deficit to widen to GBP13.9 billion in the last quarter.

The pound rallied on Wednesday after data showed that the U.K. unemployment rate fell to 7.4% in the three months to October, the lowest level since April 2009.

The upbeat data fuelled expectations that the Bank of England may raise interest rates sooner than expected. In August, the central bank pledged to keep rates on hold as long as the U.K. unemployment rate remains above 7%.

Meanwhile, the minutes of the BoE’s December meeting said further significant gains in sterling could put the U.K. economic recovery at risk.

In the week ahead, the U.S. is to release key reports on durable goods orders, new home sales and jobless claims.

Trading volumes are expected to remain light due to the Christmas holiday and as many traders already closed books before the end of the year, reducing liquidity in the market and increasing the volatility.

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

Monday, December 23

The U.S. is to produce government data on personal spending and expenditure, while the University of Michigan is to release revised data on consumer sentiment and inflation expectations.

Tuesday, December 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 data on durable goods orders, a leading indicator of production, as well as a report on new home sales.

Wednesday, December 25

Markets in the U.K. and the U.S. will remain closed for the Christmas Day holiday.

Thursday, December 26

Markets in the U.K. will remain closed in observance of Boxing Day.

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

Friday, December 27

The U.S. is to round up the week with a report on crude oil supplies.