The pound advanced against the US dollar on Monday, as data showed new home sales in the United States unexpectedly declined in December.
GBP/USD hit a session high at 1.6587 at 14:05 GMT, after which consolidation followed at 1.6577, adding 0.58% for the day. Support was likely to be received at January 24th low 1.6479, while resistance was to be encountered at January 24th high,1.6668, also the pairs highest since May 2nd 2011 high, 1.6739.
A report by the US Census Bureau revealed the new home sales in the country declined by 7% to the annualized level of 0.414 million units in December, after Novembers downward revised figure of 0.445 million units. Analysts had anticipated that new home sales will reach 0.455 million units.
Data from the same report showed the recovery of the US housing market was pressured by the higher home values and the increasing mortgage rates. The average value of a new home was 270 200 US dollars, which is up 4.6% on year-over-year basis and is the strongest level since April. The worse-than-expected current housing market conditions in the US pressured greenbacks demand.
However, the downbeat data did little to change the overall market expectations for stimulus cuts at the upcoming FOMC’s meeting this week, which is scheduled to be held on January 28th-29th. The latter continued to support US dollar demand.
The Federal Open Market Committee (FOMC) will probably reduce the monthly pace of bond purchases from the current 75 billion USD by increments of 10 billion USD at every policy meeting to exit the program this year, according to the median estimates by experts in a survey by Bloomberg conducted on January 10th.
Meanwhile, data due to be released tomorrow may show the British GDP grew 0.7% in Q4, after a 0.8% increase in the third quarter, capping the first full year of UK economic expansion in every quarter since the financial turmoil that began in 2007.
On year-over-year basis, tomorrow the report may reveal the UK economy expanded 2.8% in December from 1.9% in November. At the same time, US economy grew at an annualized rate of 1.9%.
According to Ouri Mimran and Nordine Naam, strategists at Natixis in Paris, cited by Bloomberg: Sterling “should remain upbeat” against the dollar and investors should buy the U.K. currency if it drops back below $1.64.
Data revealed on January 22nd, that the nation’s unemployment fell more-than-projected, reaching 7.1% in the three months to November, just above the 7% threshold that the Monetary Policy Committee (MPC) pledged to use as a benchmark for raising the record-low benchmark interest rate. According to the UK Office for National Statistics, that was the largest decline in unemployment since 1997 and the lowest level since May 2009.
A report by Citigroup Inc. last week forecast Bank of England will increase its record-low 0.5% benchmark interest rate in Q4 of 2014.
According to Bloomberg Correlation-Weighted Indexes, the pound was the best performer of 10 developed-nation currencies in 2013, as it strengthened 9.4% in the previous year, while at the same time the US dollar added 3.9%.
Elsewhere, USD/JPY hit a session high at 102.77 at 08:00 GMT, after which consolidation followed at 102.50. adding 0.15% on a daily basis. Support was likely to be received at January 24th low, 102.00, also the pair’s weakest since December 6th, while resistance was to be encountered at January 24th high, 103.59.