Headlines
• UK mortgage approvals rise in August –
Retail sales jump in September.
• GBP/EUR hits lowest level since May –
Despite dip in German inflation.
• ‘Cable’ close to five-month low –
US consumer confidence increases.
• Canadian GDP report on tap –
0.2% MoM, 0.7% YoY expected.
Sterling
British data came in sturdily yesterday but the Pound failed to capitalise on the decent UK ecostats as sentiment towards Sterling remained soft.
The Bank of England reported yesterday morning that mortgage approvals increased by the most since May 2008 last month as the impact of 2014’s tighter lending rules continued to recede. The number of mortgages approved jumped from 69,010 to 71,030 in August, which some analysts said could point towards a reheating of the housing market that might give the BoE a little more impetus to begin tightening monetary policy.
A separate report from the Confederation of British Industry (CBI) showed that retail sales volumes jumped from +24 to a four-month high of +49 in September. The upbeat report reflected an environment of accelerating consumer demand on the back of rising wage growth and negligible inflation.
Data this morning is anticipated to confirm that UK GDP rose at an annualised rate of 2.6% in the second quarter. Anything higher could boost the Pound; anything lower could hurt it.
Euro
Despite the decent British economic releases the Pound to Euro exchange rate fell to a near-five-month low yesterday.
The only significant data release out of the Eurozone was a German inflation print showing that consumer prices fell from 0.2% to 0.0% in September. Markets speculated that the lower-than-anticipated CPI result could persuade policymakers at the European Central Bank to bolster their liquidity-boosting quantitative easing scheme in an attempt to drive inflation back towards the 2.0% target in the face of deflationary pressures emanating from equity and commodity markets.
Although the market reaction to the dip in German inflation was fairly muted we could see the single currency punished this morning if the soft figure in the currency bloc’s largest economy tips the Eurozone wide CPI print back into negative territory.
US Dollar
The Pound to US Dollar exchange rate ticked lower by around -20 pips yesterday to strike a fresh near-five-month low as ‘Cable’ failed to find solace at a key technical support level.
American data showed that consumer confidence rose from 101.5 to 103.0, confounding market expectations of a slide to 96.1. The robust reading built upon foundations laid yesterday by hawkish Federal Reserve policymakers to boost US rate hike bets and the send the ‘Greenback’ higher.
If Sterling fails to claw back its recent losses further losses of around -150 pips look likely, however, if the Pound bounces higher there is scope for 200+ pips worth of gains.
Canadian Dollar
Despite slipping close to its lowest level in over 11 years against the US Dollar on commodity price concerns the Canadian Dollar managed to avoid any significant losses versus the Pound yesterday.
Data this afternoon is tipped to show that Canadian gross domestic product slowed on a monthly basis from 0.5% to 0.2% but rose on a yearly basis from 0.6% to 0.7%. The mixed growth report could drive volatility in GBP/CAD but unless we see a significantly weaker-than-anticipated score the ‘Loonie’ should avoid any steep Bank of Canada rate cut related losses.
Australian Dollar
The Pound to Australian Dollar exchange rate initially rallied by around 150 pips yesterday morning but demand for GBP/AUD dropped off and Sterling actually depreciated by around -70 pips by the end of the day. The next key event risk for the ‘Aussie’ Dollar is Thursday morning’s Chinese manufacturing PMI report, which is tipped to come in weakly at 49.7 and therefore could apply downward pressure to the commodity-sensitive Antipodean currency.
New Zealand Dollar
Sterling sunk to a monthly low against the New Zealand Dollar yesterday as traders pushed the ‘Kiwi’ higher on rumours that New Zealand could be granted a new trade deal to help expand its highly lucrative dairy industry into other export markets such as the United States or Canada.
Data Released Today
09:30 GBP Gross Domestic Product (YoY) (2Q F) Medium 2.6%
10:00 EUR Euro-Zone Unemployment Rate (AUG) Medium 10.9%
10:00 EUR Euro-Zone Consumer Price Index Estimate (YoY) (SEP) High 0.0%
13:30 CAD Gross Domestic Product (MoM) (JUL) Medium 0.2%
13:30 CAD Gross Domestic Product (YoY) (JUL) High 0.7%