Headlines
• Pound up on housing data –
Two-bedroom homes rise 10% this year.
• GBP/EUR rallies nearly 100 pips –
Ahead of ECB policy statement.
• Pound rises vs. US Dollar –
On positive Sterling sentiment
• GBP/AUD up 150 pips –
Chinese concerns could hurt ‘Aussie’.
Sterling
It was a good start to the week for the Pound yesterday, with Sterling registering steady gains against most of the majors on the back of last week’s hawkish BoE comments and a decent UK labour market report. The latest Rightmove house price index showed that asking prices rose by 0.6% in the first fortnight of October but analysts were drawn to the typical first-time buyer section of the report (homes with two or fewer bedrooms), which saw asking prices soar by 4.9% as strong demand and weak supply continued to drive prices up.
The data gave the Pound a little bit of a boost because markets are aware that the Bank of England is keen to tighten lending conditions sometime soon in order to prevent another bubble forming in the housing market. Over the last 12 months house prices have risen 5.6%, with two-bedroom properties rising almost 10%.
Euro
The Pound to Euro exchange rate rallied by almost a cent yesterday as jittery traders pulled out of the single currency ahead of this Thursday’s European Central Bank policy decision.
Although the ECB is widely predicted not to alter interest rates or its quantitative easing programme there is a possibility that President Mario Draghi will try to intervene verbally, perhaps by talking up the possibility of future easing in order to talk down the single currency. It is widely documented that the ECB is a long way off its target of achieving an interest rate of around 2.0% and with the Euro appreciating almost 10 cents over the past three months against the Pound it is likely that Draghi could attempt to weaken the domestic currency in order to help bolster inflation prospects.
US Dollar
Sterling appreciated by around a third of a cent against the US Dollar yesterday as sentiment favoured the UK tender at the beginning of the week.
Demand for the ‘Greenback’ picked up during the afternoon ahead of comments from Federal Reserve policymaker John Weinberg, who spoke in place of his colleague at the bank Jeffrey Lacker, who was unable to speak due to illness. Lacker has previously stated that he believes the US economy is ready for higher interest rates but the speech focussed on investment in education rather than monetary policy and therefore had no impact on the US Dollar.
Canadian Dollar
The Pound to Canadian Dollar exchange rate jumped by over 150 pips yesterday to strike an 18-day high as dovish Bank of Canada concerns clouded sentiment towards the ‘Loonie’.
The commodity-correlated currency was also impacted by the lowest Chinese GDP report since the middle of the financial crisis, which was seen to augur badly for assets with large exposure to commodity prices, such as the Canadian Dollar.
Australian Dollar
Sterling sustained a half-cent loss against the Australian Dollar in the immediate aftermath of yesterday’s Chinese GDP report, which printed above market forecasts of 6.8%, but because the figure still marked the softest growth score for the Chinese giant since 2009 the ‘Aussie’ was unable to hold onto its gains. GBP/AUD increased in value by around 100 pips during the London session.
New Zealand Dollar
Sterling also appreciated against the New Zealand Dollar yesterday as markets reacted to the six-year low Chinese growth print. GBP/NZD increased by around half a cent but the gains could have been much higher had the Chinese GDP figures come in below consensus, rather than slightly above the 6.8% projected beforehand.
Data Released Today
13:30 USD Housing Starts (MoM) (SEP)
13:30 USD Building Permits (MoM) (SEP)