Forex - GBP/USD weekly outlook: May 16-20

Investing.com – Last week the pound declined to a six-week low against the broadly stronger U.S. dollar, as signs the U.K. economic recovery is faltering dampened expectations for a rate hike by the Bank of England in the coming months.

GBP/USD hit 1.6145 on Friday, the pair’s lowest since April 5; the pair subsequently consolidated at 1.6194 by close of trade, tumbling 0.98% over the week.

Cable is likely to find short-term support at 1.6090, the low of April 5 and resistance at 1.6379, last Thursday’s high.

Data on Thursday showed that U.K. industrial output was unexpectedly weak while the National Institute of Economic and Social Research said economic growth slowed to 0.3% in the three months to April from 0.5% in the three months to March.

The pound had received a boost on Wednesday after the BoE raised its inflation forecasts in its quarterly report and indicated that interest rates could rise from the third quarter of 2011 to tackle high inflation. However, the bank it cut its economic growth forecast with the risks "skewed to the downside."

Meanwhile, a steep slide in commodities, oil and other high-yielding assets over the week saw the dollar strengthen broadly as traders sought safe harbor from volatile markets.

Looking ahead to next week, the U.S. is to publish government data on housing and employment while the Federal Reserve is to publish the minutes of its most recent policy meeting. Meanwhile, the U.K. is to publish official data on employment, consumer prices and retail sales.

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 that day.

Monday, May 16

The U.K. is to publish industry data on house price inflation, a leading indicator of the housing industry's health.

Later in the day, Federal Reserve Chairman Ben Bernanke is to speak; his comments will be closely watched for any clues to the possible future direction of monetary policy. The U.S. is also to publish government data on the balance of domestic and foreign investment as well as data on manufacturing activity in New York state.

Tuesday, May 17

The U.K. is to release government data on consumer price inflation, which accounts for a majority of overall inflation.

The U.S. is to publish official data on building permits, an excellent gauge of future construction activity as well as data on housing starts, a leading indicator of economic health. The country is also to publish government reports on the capacity utilization rate and industrial production.

Wednesday, May 18

The U.K. is to publish government data on claimant count change and the country’s unemployment rate, a leading indicator of economic health. In addition, the BoE is to publish the minutes of its most recent policy meeting. The minutes give in-depth insights into the economic conditions that influenced the decision on where to set interest rates.

Later in the day, the Federal Reserve is also to publish the minutes of its last policy meeting. In addition, the U.S. is to publish government data on crude oil stockpiles.

Thursday, May 19

The U.K. is to publish official data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity. Later in the day, the country is to publish industry data on industrial order expectations.

The U.S. is to round up the week by publishing its weekly report on initial jobless claims as well as industry data on existing home sales and official data on manufacturing activity in Philadelphia.