The pound advanced to the strongest level in a week against the US dollar, following a report that revealed UK retail sales increased at the fastest pace in 2-1/2 years in January, adding to evidence the UK economic recovery is gaining traction.
GBP/USD touched a session high at 1.6434 at 00:45 GMT, after which the pair trimmed earlier gains to trade little changed at 1.6412 at 09:08 GMT, adding 0.06% on a daily basis. Support was likely to be received at February 10th low, 1.6383, while resistance was to be met at February 3rd high, 1.6438.
Sterlings demand was supported after the British Retail Consortium reported today that retail sales surged by 3.9% in January from a year ago, marking the largest increase since May 2011. Januarys reading came well above analysts expectations of a 0.8% advance and after retail sales rose mere 0.4% in December.
On Thursday, BoE’s Monetary Policy Committee (MPC) said it will keep its benchmark interest rate unchanged at a record low 0.5%. MPC also decided to leave its quantitative easing program of monthly asset purchases unchanged at 375 billion pounds.
The minutes of Thursday’s policy meeting of the central bank are scheduled to be released on February 19th.
The Governor of Bank of England, Mark Carney, commented a week before the MPC meeting that the UK economy has to strengthen more, before policy makers start scaling back their monetary stimulus.
The central bank is scheduled to release its latest quarterly inflation report tomorrow, in which the central bank will show its updated forecasts for economic output and index of consumer prices.
The sterling has appreciated 9.2% in 2013, marking the best performance among the 10 developed-nation currencies, which are tracked by Bloomberg Correlation-Weighted Indexes. At the same time, the US dollar has risen 4.6%.
Meanwhile, market players keenly anticipated the first testimony of Janet Yellen, the newly elected chairman of the Federal Reserve, for clues about the US central bank’s economic outlook and signals for any change in Fed’s monetary policy. Yellen is scheduled to read her prepared testimony before the House Financial Services Committee at 15:00 GMT, after which she will answer lawmakers’ questions.
The central bank announced its decision to reduce monthly monetary stimulus by 10 billion USD to 65 billion USD at the meeting on policy in January, underscoring that labor market indicators, which “were mixed but on balance showed further improvement”, while nation’s economic growth has “picked up in recent quarters.” Fed policymakers are to hold their next meeting on March 18th-19th.
Elsewhere, AUD/USD touched a session high at 0.9015 at 1:05 GMT, also the pair’s highest point since January 14th, after which consolidation followed at 0.9006, rising 0.63% for the day. Support was likely to be received at February 10th low, 0.8907, while resistance was to be encountered at January 14th high, 0.9054.
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