Investing.com – The pound rose to fresh five-and-a-half year highs against the U.S. dollar on Tuesday, following dovish comments by Federal Reserve Chairwoman Janet Yellen and as earlir U.K. data continued to support.
GBP/USD hit 1.7192 during U.S. morning trade, the pair’s highest since October 2008; the pair subsequently consolidated at 1.7156, climbing 0.42%.
Cable was likely to find support at 1.7060, the session low and resistance at 1.7874.
Ms. Yellen said the U.S. economy is continuing to improve but added that the recovery is not yet complete. She said that considerable slack still remains in the labor market and wage growth remains weak.
The remarks came during testimony to the Senate Banking Committee in Washington.
The Fed chair reiterated that rates are likely to remain on hold for a considerable period after the bank’s quantitative easing program ends.
Interest rates could rise sooner more quickly if the labor market was to improve more quickly than expected she said, but added that if the economic recovery is disappointing interest rates would remain accommodative.
Yellen’s comments came after the Commerce Department reported that U.S. retail sales rose just 0.2% in June, below forecasts for a 0.6% increase. Retail sales for May were revised up to 0.5% from a previously reported 0.3%.
A separate report showed that manufacturing activity in New York state rose to a four year high this month. The Empire state manufacturing index rose to 25.6 from 19.3 in June. Analysts had expected the index to decline to 17.0.
The pound strengthened earlier, after the Office for National Statistics reported that consumer prices rose 1.9% on a year-over-year basis in June, accelerating from 1.5% in May and well above expectations of 1.6%.
Consumer prices ticked up 0.2% last month, the ONS said, compared to estimates of a 0.1% decline.
A separate report showed that the house price index climbed 10.5% in the year to May from 9.9% in the year to April.
The upbeat data added to signs that the economic recovery in the U.K. is deepening, bolstering expectations that the Bank of England will raise interest rates before the end of the year.
Sterling was also higher against the euro, with EUR/GBP declining 0.75% to 0.7912.