GBP/USD rebounds from 1-month lows amid increasing UK home prices

The UK pound rebounded from the lowest level in a month against the US dollar, after data showed a gauge of UK house prices advanced the most in six years this month.

GBP/USD hit a session high at 1.6453 at 09:10 GMT, after which consolidation followed at 1.6448, adding 0.17% for the day. Support was likely to be received at January 17th low, also the pairs weakest level since December 18th, while resistance was to be encountered at January 17th high, 1.6458.

According to data by the property company Rightmotive Plc., the average asking prices in UK soared by an annualized rate of 6.3% in January, the largest advance since November 2007. On monthly basis, the average asking prices rose by 1.0% this month, after declining 1.9% in December.

The pound rebounded from one-month lows against the US dollar on Friday after a report by the UK Office for National Statistics. Data showed the nation’s retail sales advanced at the fastest pace since June 2008, soaring by 2.6% in December or 8 times higher than the median analyst’ forecast of a 0.3% increase. The retail sales in November were revised downwards from 0.3% to 0.1%. On annual basis, UK retail sales surged by 5.3% in December, while analysts had expected the retail sales will increase by 2.5%. In November, retail sales were revised downwards to 1.8% from 2%

Data also showed that the core retail sales, or those excluding sales of automobiles and fuel, which tend to be volatile, increased by 2.8% in December, outstripping analysts’ forecasts of a 0.3% increase. On annual basis the core retail sales soared by 6.1%, while analysts had predicted a smaller gain of 3.2%.

The retail sales and core retail sales can be regarded as leading indicators of consumer spending, which accounts for the majority of the overall economic activity.

Investors awaited minutes of Bank of Englands policy meeting in January, which is scheduled for release on Wednesday. On the same day a separate government report may show UK unemployment declined towards BoEs target of 7%, which will be used as a benchmark for raising interest rates.

According to a Bloomberg survey, the jobless rate probably fell to 7.3% in the three months through November, from 7.4% in the quarter through October.

Meanwhile, US markets are to remain closed due to a national holiday.

A series of overall upbeat data provided signs that US economic growth is accelerating and recovery seemed sustainable. US home construction slowed less than analysts had projected, while industrial output expanded for a fifth consecutive month. Only the consumer sentiment came at a lower-than-expected reading in January, but this was not enough to change the overall market consensus that Fed will continue tapering throughout 2014.

A report by the US Commerce Department on Friday, showed that housing starts decreased 9.8% to 999 000 annualized rate in December, after they have been revised to 1.11 million pace in the previous month, the strongest figure since November 2007. Analysts had expected that housing starts will decline to 985 000 in December. Building permits fell by 3% to a 986 000 pace.

Last year, builders began constructing 923 400 homes, which is 18.3% higher than a year ago and is the largest number since 2007, when 1.36 million houses were constructed.

At the same time, industrial production in the United States rose 0.3% in December on a monthly basis, in line with expectations, supported by overall recovery in manufacturing and mining sectors. On annual basis, industrial output expanded 3.7% in December, or 0.9% higher than the peak registered before the global recession. November’s result has been revised down to a 1.0% increase from 1.1% gain previously. In October and September, however, nation’s industrial production has been moderately revised up.

The US dollar was slightly pressured, following the release of a worse-than-expected consumer sentiment data in January. January’s preliminary reading of the Thomson Reuters/University of Michigan consumer sentiment index registered at 80.4, defying analysts’ projections for an advance to 83.5 from December’s final reading of 82.5.

Overall, the reports provided support to greenback’s demand, as they favored the view that the Federal Reserve Bank may continue tapering during the year. Central bank’s policy makers said on December 18th that they will reduce monthly asset purchases to $75 billion from $85 billion, underscoring improving labor market conditions.

The bank will probably continue to pare stimulus by $10 billion at each policy meeting before exiting the program in December, according to a Bloomberg News survey of 41 economists, conducted on January 10th. The Federal Open Market Committee is scheduled to meet next on January 28-29.

Elsewhere, AUD/USD touched a daily high at 0.8804 at 2:00 GMT, after which consolidation followed at 0.8792, rising 0.14% for the day. Support was likely to be received at July 22nd 2010 low, 0.8738, while resistance was to be met at January 17th high, 0.8828.