The pound advanced for a second day against the US dollar, after industry data revealed mortgage approvals in the UK rose to a six-year high, while at the same time UK retail sale volumes hit the strongest level in 1-1/2 years, adding to evidence the recovery is gaining traction.
GBP/USD touched a session high at 1.6706 at 10:00 GMT, after which the pair consolidated at 1.6696, adding 0.25% for the day. Support was likely to be found at February 24th low, 1.6584, while resistance was to be encountered at February 21st high, 1.6725.
The British Bankers Association reported today that loans for home purchases in the UK surged to 49 972 in January, the most since September 2007. In December the number of new mortgages approved was 46 521. The median analyst forecast was for a smaller increase to 47 150 in January.
The sterling was supported after it became clear that Bank of England policy maker Ian McCafferty was cited by Reuters as saying the strength of the UK currency is not yet considered as a “major problem” for nations exports.
However, McCafferty also underscored, referring to the strength of the pound, “were it to continue to rise, I would get more worried,” according to the interview with Reuters. He also added that market expectations for an interest rate increase in the second quarter of next year are “not unreasonable”.
“The market’s default position for sterling is one of optimism,” said Jane Foley, senior currency strategist at Rabobank International in London, cited by Bloomberg. “The majority of data is suggestive of continued economic recovery. Expectations are being pared back for the U.S. recovery. Therefore sterling remains quite well supported against the dollar.”
In addition, UK retail sale volumes rose to the strongest level since June 2012 this month, further supporting the optimism over the UK economic outlook.
Data by the Confederation of British Industry revealed the result of its monthly survey among UK retailers, with the corresponding index surging by 23.0 points to a reading of 37.0 in February from 14.0 in the previous month, exceeding analysts expectations for a minor increase to 15.0 points. A reading above zero is indicative of higher retail sales volume, while a reading below zero is indicative of lower volume.
On February 12, Bank of England raised its forecast for the UK economic growth in 2014 to 3.4% from 2.8% projected in November and predicted the first increase of interest rates will come in April 2015. Bank of England projected inflation of 1.9% in the next three years, below the central bank target of 2%.
Data scheduled to be released tomorrow, may show the Gross Domestic Product grew at a slower pace in the fourth quarter. According to the median expert’ forecast, UK Gross Domestic Product rose 0.7% in the fourth quarter, after expanding 0.8% in the three months through September.
The sterling has advanced 12% in the past twelve months, being the best performer of 10-developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, while the US dollar rose mere 0.9%.
Meanwhile, home values in 20 large cities in the United States probably curbed their increase, with the corresponding index rising at an annualized rate of 13.38% in December, according to the median estimate by experts. In November home prices gained 13.71%. S&P/Case-Shiller will publish the official figures at 14:00 GMT today.
At 15:00 GMT the Conference Board research group is expected to announce the results from its survey on consumer confidence regarding the United States. The index of consumer confidence probably slowed down to a reading of 80.0 in February from 80.7 in the preceding month. Higher than expected readings will certainly provide support to greenback’s demand.
Consumer confidence, as an indicator, provides clues regarding the tendency in consumer spending in the country, while the latter accounts for almost two thirds of nation’s Gross Domestic Product.
Elsewhere, EUR/USD hit a session high at 1.3763 at 08:20 GMT, after which consolidation followed at 1.3752, adding 0.12% for the day. Support was likely to be received at February 24th low, 1.3708, while resistance was to be encountered at February 24th high, 1.3773.