Dollar strengthens after US data, pound resumes drop

The U.S. dollar added to gains, to hover around a two-week high versus major currencies, after strong housing starts data.

Housing starts rose 15.7 percent in July to 1.09 million, marking the highest level in eight months, following a 4.0 percent plunged in June.  Building permits climbed 8.1 percent last month to 1.03 million after falling 3.2 percent in June.  

CPI soared 0.1 percent in July, the smallest gain since February, following a 0.3 percent surge in June, the Labor Department said on Tuesday.

Tomorrow, minutes of the Fed’s July 29-30 meeting will be available, while Janet Yellen will speak on Thursday at an annual central bankers’ conference in Jackson Hole, Wyoming.

The dollar index, which tracks the green currency’s movements versus a basket of major currencies, jumped to touch a new peak of 81.87, compared with the session’s opening of 81.62.

The GBPUSD fell tremendously to hit a bottom to 1.6621, compared with the session’s high of 1.6727.

The sterling plunged after a report showing CPI slipped more than forecasts in July, raising expectations the BOE would hold interest rates near its record low for longer period.

Data released on Tuesday showed that CPI for the year ended July retreated to 1.6%, from 1.9% in June, below analysts’ forecast of 1.8 percent.

Eyes will focus on BOE minutes for August meeting, where it may show a split among the nine-panel MPC members over the amount of slack in the economy, the key measure Mark Carney shifted to after the drop in unemployment rate.