Forex - GBP/USD weekly outlook: February 18 - 22

The pound fell to six-and-a-half month lows against the dollar on Friday after official data showed that U.K. retail sales fell more-than-expected in January adding to fears over the economic outlook.

GBP/USD hit a low of 1.5461 on Friday, the pair’s lowest since July 25, before settling back at 1.5516, 0.16% higher for the day but down 0.90% for the week.

Cable is likely to find support at 1.5371 and resistance at 1.5549, Friday’s high.

The pound fell sharply after the Office for National Statistics said U.K. retail sales dropped 0.6% in January as a result of heavy snow, confounding expectations for a 0.4% increase.

The data fuelled concerns over the faltering U.K. economy, which contracted by 0.3% in the three months to December.

On Wednesday, the Bank of England cut its outlook for growth in its quarterly inflation report and said inflation would remain above target until early 2016.

The BoE said inflation is likely to be at around 2.3% in two years’ time, sharply higher than the 1.8% forecast in November, before falling back below the bank’s 2% target in the first quarter of 2016.

The central bank said the economy will experience a "slow but sustained recovery" over the next three years, saying economic growth was likely to remain below its pre-crisis levels until 2015 and that it stood ready to provide more stimulus as needed.

In the U.S. data on Friday indicated that the economic recovery remains uneven.

The New York Federal Reserve reported manufacturing in New York state expanded in February, while a survey showed a surprisingly strong rise in U.S. consumer sentiment.

The Empire State manufacturing index rebounded to 10.0 in February, from minus 7.8 in January, outstripping expectations for a reading of minus 2.

The University of Michigan said its index of consumer confidence rose to 76.3 from 73.8 in January, better than expectations for a reading of 74.8.

However, a separate report showed that industrial production in the U.S. slipped 0.1% in December after a revised 0.4% gain in December. Economists had been expecting an uptick of 0.2%.

In the week ahead investors will be awaiting Wednesday’s minutes of the Federal Reserve’s January meeting, while the BoE is to release the minutes from its latest policy meetings on Wednesday.

Meanwhile, U.K. jobs data will also be closely watched.

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 Tuesday and Friday as there are no relevant events on this day.

Monday, February 18

Markets in the U.S. are to remain closed for the President’s Day holiday.

Wednesday, February 20

The U.K. is to publish official data on the change in the number of people claiming unemployment benefits and the unemployment rate. Meanwhile, the BoE is to publish its monetary policy meeting minutes.

The U.S. is to release official data on building permits, a strong indicator of future construction activity, as well as data on housing starts. The U.S. is also to publish official data on producer prices, while the Federal Reserve is to release the minutes of its most recent policy meeting.

Thursday, February 21

The U.K. is to release official data on public sector net borrowing as well as a report on industrial order expectations.

The U.S. is to release official data on consumer price inflation as well as the weekly government report on initial jobless claims. The U.S. is also to publish industry data on existing home sales, a report on manufacturing activity in Philadelphia and official data on crude oil stockpiles.