Credit Markets Continue to Blossom

The appetite for mortgage loans in the UK continues to recover at a steady pace, as the BoE’s Funding for Lending scheme seems to have offered a fillip to the demand for credit in the financial system. However, the manufacturing sector showed no major signs of recovery, as the CBI’s survey revealed that total orders showed a minor uptick but remained deep in the contraction territory. Meanwhile, hopes of EU policymakers reaching an agreement today on the region’s budget appear to be dwindling. For the week ahead, the Eurozone finance ministers meeting and the outcome of Catalonia election in Spain will be the key trend setters.

Pound Sterling – UK Markets

The Pound is trading almost flat against the greenback and lower against the Euro in today’s session. Data from the BBA just out has revealed that mortgage loans in the UK continued to climb for October, offering signs of strengthening credit off take in the financial system. In yesterday’s trading session, Sterling weakened against the Euro following encouraging response to the Spanish bond auctions and improved manufacturing activity data across Europe. Additionally, the CBI’s data offered no signals of the UK economy replicating the strong performance shown in the previous quarter. The manufacturing activity in the UK continued to reel under pressure due to turbulent conditions overseas, as the latest trend survey from the CBI showed that the UK manufacturers expect output to fall over the next three months, with overall orders remaining relatively flat. Meanwhile, market attention today would remain focused on the European policymakers meeting in Brussels, wherein the British Prime Minister, David Cameron, has vowed to halt “unacceptable” budget increases.

US Dollar – US Markets

The US Dollar has continued to nudge lower against its major peers in today’s session following upbeat manufacturing data in China and across Europe. Additionally, hopes of Greece receiving its next aid tranche remained elevated, following reports that the Eurozone leaders would reach an agreement as early as Monday. With the greenback looking for direction, traders are expected to keep a close eye on a raft of domestic economic releases scheduled next week. Apart from a flurry of regional manufacturing indices, the second estimate of the third quarter GDP reading will hog the spotlight. Additionally, durable goods orders and personal consumption spending is expected to shed some light into the demand trends in the US economy. In the absence of any major domestic data in today’s session, focus will shift to the outcome of today’s meeting between EU lawmakers. Reports indicate that there is little prospect of the EU leaders bridging their differences to reach a deal on the EU budget.

Euro – European Markets

A positive response to the Spanish bond auction led the Euro to stage a recovery against the majors in yesterday’s trading session. Moreover, an improvement in manufacturing activity across Europe and China supported risk appetite among investors. The Euro continues to capitalise on yesterday’s gains and is trading close to the 1.29 mark against the US Dollar this morning, as traders remain hopeful that policymakers in the Eurozone would reach an agreement on Monday for the dispatch of Greece’s next aid tranche. Moreover, data released earlier today confirmed that the German GDP grew 0.4% annually for the third quarter and business sentiment in Germany improved more than expected for November. The EU policymakers’ are expected to meet once again today in an attempt to break the deadlock for finalising proposals for the region’s budget. The outcome is likely to prove decisive for the Euro against the majors. Meanwhile, Sunday’s regional elections in Spain and the Eurozone finance ministers meeting on Monday will remain the key events to watch for the week ahead.

Other Currencies – Highlights

The Canadian Dollar has recovered some of its previous session losses against the US Dollar this morning on account of easing worries in the Eurozone. In yesterday’s trading session, the Canadian Dollar was under pressure against the greenback after data revealed that retail sales growth in Canada trailed market estimates. On a monthly basis, retail sales grew 0.1% to C$39.1 billion for September, lower than market expectations of a 0.5% growth. In today’s trading session, traders are expected to keep a watch on consumer price inflation figures later in the day for further clarity about the monetary policy in the near future. Additionally, the situation in the Middle East region would also be keenly eyed to gauge the movement of crude oil prices which could prove to be crucial for the Canadian Dollar against the majors. Moreover, the Eurozone finance ministers meeting next week and negotiations on the “fiscal cliff” will be the key trend setter for the next few trading sessions.