Pound rises after positive UK mortgage and PMI data
The US dollar dropped against key currencies as traders continued to reflect on the dovish tone by the Federal Reserve chair. In the statement, Jerome Powell said that the Fed would allow inflation to move above the target of 2%. This was interpreted to mean that rates will remain at the current historic low for the next few years. Also, the currency dropped as protests continued to engulf most cities in the US, raising the risk for more coronavirus infections. The currency dropped by 0.77% against the British pound, 0.46% against the euro, and by 0.30% against the Swiss franc.
The British pound rose to the highest level since December last year as traders reacted to strong mortgage data from the UK. According to the Bank of England, the number of mortgage approvals in the UK rose to 66.3k in July. That was higher than the 54.84k that analysts were expecting and the previous increase of 39.9K. As a result, the total mortgage lending increased to £2.7 billion from the previous £2.39 billion. In the same month, consumer credit increased to £1.2 billion from the previous decline of more than £382 million. Meanwhile, data from Markit showed that the manufacturing PMI rose to 55.2 in August.
The euro rose against the US dollar as traders reflected on the tepid inflation from Europe and the rising unemployment rate. According to Eurostat, the core CPI dropped from 1.2% in July to 0.4% in August. On a month-on-month basis, the CPI declined to -0.4%. The headline CPI declined to -0.2%, signalling that the region was in deflation. Other data showed that the unemployment rate rose to 7.9%. According to Markit, the manufacturing PMI declined to 51.7 from the previous 51.8.
The EUR/USD pair rose to an intraday high of 1.1990, which is the highest it has been in years. On the daily chart, the price has jumped above the previous resistance level at 1.1970. It is above the short and longer-term moving averages and the Ichimoku cloud. It is also along the ascending line of the Bollinger Bands. At the same time, the RSI is slightly below the overbought level. Therefore, the price is likely to continue rising as bulls aim for the next resistance at 1.2000.
The GBP/USD rose to an intraday high of 1.3471, which is the highest it has been since December last year. On the daily chart, the price is above the 50-day and 100-day exponential moving averages. Also, the momentum indicator is above the neutral level of 100, which is a sign of high demand for the sterling. Therefore, the pair is likely to continue rising as bulls aim for the next resistance at 1.3500.
The XAG/USD pair rose to an intraday high of 28.80 because of the strong manufacturing PMI data from China and the weaker US dollar. On the daily chart, the price is slightly below the previous resistance level of 29.90. It is also above the 50-day and 100-day EMA. Also, the price has broken out above the important resistance level shown in pink. Therefore, the price is likely to continue rising as bulls aim for the next psychological level of 30.00.