GBP Breaks above 1.60

by Korman Tam

The greenback was mixed in the Wednesday session, slumping sharply against the sterling to a near 7-month low and edging up versus the yen.

Economic data from the US was better than expected earlier today. Existing home sales shot up by 2.9% in April to 4.68 million units, reversing a downwardly revised 3.4% decline in March. Traders will look ahead to data on Thursday, including weekly jobless claims, April durable goods orders and new home sales.

Sterling Rallies

The pound advanced to its highest level since October 2008 against the dollar, above the key 1.60-level to 1.6084 and its strongest level against the euro since February at 0.8655. The sterling, which has been aggressively sold in recent months, garnered the lion’s share of the move to riskier assets overnight. With speculation that US debt may also follow in the footsteps of the UK credit outlook, which was downgraded by the S&P last week from stable to negative, traders continued to bid the sterling higher from oversold territory.

The economic calendar from the UK is light, with the release of the May CBI industrial trends survey. The CBI survey is expected to post a reading of -10 in May compared with a reading of 3 in April.

Cable holds steady near the 1.6060-level with interim resistance seen at 1.6085, followed by 1.61 and 1.6130. Subsequent ceilings are eyed at 1.6160, followed by 1.62 and 1.6250. On the downside, support starts at 1.6025 backed by 1.60 and 1.5970. Additional floors are seen at 1.5940, followed by 1.59 and 1.5850.

Euro Regains Footing

The euro recovered off its session lows against the dollar to edge back above the 1.39-foothold. A barrage of economic reports from the Eurozone are slated for release in the coming session, consisting of Germany’s May unemployment data, Eurozone economic sentiment, consumer sentiment, inflation expectations and business climate.

Germany’s May unemployment rate is expected to creep higher to 8.4%, from 8.3% a month earlier, while the unemployment change is seen jumping to 64k, up from 58k in April. The May Eurozone consumer sentiment is estimated to improve moderately to -30 from -31.0 a month earlier and industrial sentiment is seen edging up to -33 versus -35 in April.