Strong Data Lift Pounds to 2013 Highs
Cable was one of the strongest of the major currencies on Wednesday on the heels of stronger than expected UK data which lifted the yield differential in favor of the pound. Growth in the region continues to be robust assisted by a driven consumer which offset weaker than expected export data.
The UK confirmed its third quarter GDP of 0.8% and the continued recovery of the British economy. The details of the GDP report were constructive, with a broad recovery evident in nearly all the sub-components, led by the consumer. The biggest contribution to that rise came from consumers, who upped their expenditure by 0.8%, the eighth straight increase and the fastest in more than three years. Exports fell 2.4% in the third quarter, which was not welcome, according to the Office for National Statistics.
US yields continue to slide, despite solid permits numbers. Building permits issued in October rose 6.2% from a month earlier to an annual rate of 1.034 million, the strongest pace since June 2008. Most of the increase was driven by multifamily homes which increased more than 15% in October, while single-family permits rose only 0.9%. The single-family segment is considered a steadier gauge of the underlying health of the housing market. Permits are generally used as a gauge of future housing starts, which were not released and have been delayed to December 18, 2013 due to the government shutdown.
Pound futures broke out and moved above horizontal trend line resistance near 1.6240. The next level of target resistance is seen near 1.6450. Support is seen near the 10-day moving average at 1.6150. Momentum is robust with the MACD (moving average convergence divergence) index generating a buy signal. The RSI on the December pound futures contract is printing near 63, which is on the upper end of the neutral range.
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