Recent attempts by the GBP USD rate to settle above the 1.38 have been short-lived – and the trend continued Tuesday.
The pound briefly jumped above the resistance level before tumbling back to the 1.37 midrange against the dollar, where it has been stuck for much of the week.
Another day devoid of data from the UK economy meant a clutch of influential indicators from the US were in focus for the pair – and it was a mixed bag of numbers for the dollar.
There are signs that price growth could be easing in the US housing market, which has been running hot since before the pandemic struck.
House prices increased by 19.8% year over year in August, according to the S&P CoreLogic Case-Shiller Indices – a measure of changes in the value of the residential property market in 20 regions across the US. This was the same as the previous month and is the first time the annual gain hasn’t risen since early last year.
Craig Lazzara, managing director and global head of index investment strategy at S&P DJI said: “We have previously suggested that the strength in the US housing market is being driven in part by a reaction to the Covid pandemic, as potential buyers move from urban apartments to suburban homes,”
“August data also suggest that the growth in housing prices, while still very strong, may be beginning to decelerate.”
Sales of new homes in the US – which account for more than 10% of domestic sales – hit a six-month high in September. However, higher house prices are making owning a home less affordable for some first-time buyers.
New home sales leapt 14% to a seasonally adjusted annual rate of 800,000 units, the Commerce Department said on Tuesday. Economists had forecast that new home sales would increase to a rate of 760,000 units.
US consumer confidence rose unexpectedly this month as inflation concerns were offset by labour market optimism, indicating that economic growth was gathering pace following an unstable third quarter.
The Consumer Confidence Index released by the Conference Board on Tuesday jumped to a reading of 113.8 in October from 109.8 last month, arresting three consecutive monthly declines. Economists had forecast the index would dip to 108.3.
Pre-Christmas price rises predicted in the UK
Figures released overnight prompted British retailers to warn of pre-Christmas price rises, following the smallest year-on-year fall in the average selling price of goods in stores since before the onset of the Covid-19 pandemic.
The British Retail Consortium (BRC) Shop Price Index showed that prices in popular retail outlets increased by 0.4% on the month in October and were 0.4% lower than the same period last year – the smallest year-on-year fall since January 2020.
BRC chief executive Helen Dickinson said: “It is now clear that the increased costs from labour shortages, supply chain issues and rising commodity prices have started filtering through to the consumer,”
It’s another barren day in the UK economic calendar, but investors in the pound have plenty to keep them occupied. Chancellor Rishi Sunak will set out his budget and spending review on Wednesday, with the government under pressure to ease the strain on hard-pressed families amid soaring inflation.
Two influential economic indicators are published in the US today: Durable Goods Orders and Nondefense Capital Goods Orders (excluding aircraft) – both for September.
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