Dollar Rally Accelerates Against Sterling as UK Data Disappoint

The US currency has strengthened against all major currencies and gold, and its rally versus the British pound was boosted by weaker than expected housing market and confidence data from the UK.

Australian dollar was the only currency from G10 that weakened more than Sterling against the greenback on 31 July.

At 13:15 GMT, GBP/USD was down 0.3% while EUR/USD was down 0.12%. The Japanese yen has weakened 0.12%, the Canadian dollar 0.14% and the Kiwi dollar only 0.08% against the US dollar.

Consumer confidence in UK as measured by GfK NOP, dropped below zero to -2.0 in July from 1.0 in June, which was its first positive reading in more than ten years.

GfK managing director Nick Moon said all five of the component parts of the index fell this month, with four-point drops in both the questions about the country's general economic situation being particularly noticeable.

Nationwide data released on 31 July revealed UK house prices had increased by 0.1% in July - the slowest pace since April 2013. Annual house price growth remained in double digits, but slowed to 10.6% from 11.8% in June, data came at 6:00 GMT showed. The market consensus was for a growth of 11.3%.

"The slowdown was not entirely unexpected, given mounting evidence of a moderation in activity in recent months,"" said Robert Gardner, Nationwide's chief economist.

"Mortgage approvals declined by almost 20% between January and May, and there has also been some softening in forward looking indicators, such as new buyer enquiries," Gardner said.

GBP/USD fell 1.6889, its lowest since 12 June, from its previous close of 1.6913. The pair has fallen about 0.5% over the past two sessions, after the US growth data surprised on the higher side.

The 1.45% drop in July marks Sterling's sharpest monthly loss since May 2013.

The Australian dollar was down 0.4% against its US counterpart because the building permits data for June came weaker than expected. Month-on-month, permits declined 5%; worse than the market forecast of 2% drop. May had seen a 10.3% rise.

AUD/USD fell to an eight-week low of 0.9278 on Thursday from its previous close of 0.9331.

Gold has fallen to a 42-day low of $1285 from Wednesday's close of $1295.70. The yellow metal had strengthened to a four-month high of $1345 during this month but has ended the month 3.17% weaker.

Sterling's Technical Outlook

The GBP/USD pair will have its next support at 1.6750 ahead of 1.6690 and a break of that will expose the 23.6% Fibonacci retracement of the one year rally to June 2014 at 1.6630.

A break of that will open doors to 1.6250, near the next Fibonacci level, and it seems to be a stronger support line.

On the higher side, the pair will look at 1.6920 and then at 1.7002. A break of 1.7064 will open doors to the retest of the 15 July peak of 1.7192.