GBP/USD trades little changed following CBI industrial order data

The pound traded little changed against the US dollar, after the Confederation of British Industry (CBI) released mixed data on UK factory orders in January.

Having hit a session high at 1.6452 at 10:10 GMT, GBP/USD traded little changed at 1.6429 at 12:49 GMT, adding 0.01% on a daily basis. Support was likely to be received at January 20th low, 1.6396, while resistance was to be met at January 20th high, 1.6453.

A report by the Confederation of British Industry showed today that the total volume of orders for the coming three months soared to 22 from 14, marking the largest level since the three months ended April 2012.

However, the CBI index of industrial order expectations plunged to -2 in January from 12 in the preceding month. According to the median analyst forecast the index should have declined to 10 this month.

Data from the same report revealed also that the quarterly UK business outlook decreased to 21 in the months ending January from 24 in the months ended October. Octobers quarterly balance was the highest in 3-1/2 years.

According to data by the property company Rightmotive Plc. released yesterday, 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.

Investors awaited the minutes of Bank of England’s 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 BoE’s target of 7%, which will be used as a benchmark for raising interest rates.

Meanwhile, greenback’s demand continued to be supported by a recent batch of overall upbeat reports, which increased bets for further cuts in Fed stimulus.

Data showed on Friday that 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, 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 release of worse-than-expected consumer sentiment data in January, slightly pressured the greenback’s demand. 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, EUR/USD touched a session low at 1.3525 at 10:00 GMT, after which consolidation followed at 1.3536, losing 0.12% for the day. Support was likely to be received at January 20th low, 1.3508, also the pair’s lowest since November 25th, while resistance was to be encountered at January 20th high, 1.3568.