The dollar edged higher against the majors in the Tuesday session, advancing to its highest level since September versus the euro at 1.4216 and a two-month high against the British pound at 1.5920. A barrage of economic reports were released from the US including Q3 GDP, October home prices, November existing home sales, and the December Richmond Fed survey.
Economic growth in the US slowed in the third quarter with GDP downwardly revised to 2.2% from the previous reading of 2.8%. The Q3 GDP deflator was lower at 0.4% from 0.5% previously and PCE prices slipped to 2.6% from 2.7%. Third quarter corporate profits were also downwardly revised to 12.7% compared with 13.4% previously. The key highlight in the data was a strong surge in November existing home sales, which spiked up to 7.4% -- far outpacing estimates for a decline to 2.9% and improving to 6.54 million units. The October home price index improved to 0.6% on a monthly basis and declined by 1.9% on an annualized basis. Meanwhile, the Richmond Fed composite index deteriorated to -4 in December versus a 1.0 reading in the previous month while the services index worsened to -9 from -7.
The calendar for Wednesday includes November PCE, personal income, consumption, the December University of Michigan consumer confidence index, and November new home sales.
GBP tumbles on GDP
The British pound fell to its lowest level in two-months against the dollar at 1.5920 as a result of disappointing UK growth data. The Q3 GDP declined by 0.2% q/q and contracted by 5.1% y/y. The current account deficit improved to 4.703 billion pounds in Q3 from a deficit of 11.42 billion previously. Nonetheless, the data reinforced sentiment that the UK economy continues to struggle and will likely result in the sterling underperforming in the coming months against the major currencies.
Cable holds steady beneath the 1.60-level with support starting at 1.5960, followed by 1.5930 and 1.59. Subsequent floors will emerge at 1.5870, backed by 1.5840 and 1.58. On the upside, resistance starts at 1.60, followed by 1.6050 and 1.6080. Additional ceilings will emerge around 1.61, backed by 1.6145 and 1.6180.