UK BBA Mortgage Approvals Fall

Data just out has indicated that UK mortgage approvals fell unexpectedly for July. This coupled with falling house prices in the nation earlier had eased some concerns of a potential development of a bubble in the UK housing market. Meanwhile, over the weekend, the BoE Deputy Governor, Ben Broadbent has indicated that wage growth is unlikely to show an improvement for some more time, dampening expectations of an earlier than expected rate hike in the nation. With the ECB standing pat on its decision to unveil further stimulus, recent weak economic data have further lent support to the need of additional measures in order to boost recovery in the Euro area ahead of next week’s monetary policy meeting. Across the Atlantic, today’s housing market data will be keenly eyed following a mixed picture painted by the recent housing market data in the nation.

Pound Sterling – UK Markets

The Pound dropped against the US Dollar after the Fed Chief, Janet Yellen, indicated that the US economy continues to show signs of improvement, though she struck a more balanced view. Additionally, over the weekend, the BoE Deputy Governor, stated that the central bank does not intend to hike interest rates until there are signs of improvement in the nation’s wages while stating that they are unlikely to pick up anytime soon. The comments have dampened hopes of an earlier than expected rate rise, adding further pressure in the Pound-US Dollar pair. The comments were in contrast with the recent speech given by the BoE Governor and showing signs of debate amongst policymakers, especially after two of its policymakers dissented which was evident in last week’s minutes. Meanwhile, the Pound is trading in a tight range against the US Dollar this morning. Data just released indicated that BBA mortgage approvals unexpectedly fell for July, despite house prices falling as reported earlier this month. Going forward today, a slew of US macro releases will keep investors in the Pound-US Dollar pair interested.

US Dollar – US Markets

The greenback remained range bound against the common currency in yesterday’s trading session. The US Fed Chair, Janet Yellen, failed to provide investors any hint towards the timing of an interest rate hike and offered a balanced view about the state of the US economy. Meanwhile, the Markit’s preliminary PMI report released in the US yesterday showed a more than anticipated drop in the pace of services sector activity for August. Furthermore, new home sales in the US declined unexpectedly for July, keeping awake the mixed signs of development in the housing market, especially after the upbeat existing home sales and the housing starts data were released earlier this month. The greenback is trading on a weaker footing against the majors this morning. US durable goods orders are expected to show a sharp rise for July, particularly after strong demand for Boeing aircrafts in July. Meanwhile, the Conference Board’s report is likely to show a deterioration in domestic consumer confidence for August, suggesting prospects of a slowdown in the nation’s inflation rate.

Euro – European Markets

The Euro slipped below the 1.32 mark against the US Dollar, as dovish comments from the ECB Chief, Mario Draghi. The ECB Chief at the Jackson Hole conference on Friday indicated that the central bank stands ready for another round of unconventional stimulus measures, if the downward trend in the Euro zone inflation continues to weigh on the region’s economic growth. Against this backdrop, markets will keep a close watch on this week’s inflation readings from key European economies to gauge the inflationary trend in the region and further deterioration in the trend is expected to add pressure on the ECB ahead of its policy meeting next week. Additionally, data released yesterday showed that the German Ifo business morale deteriorated to a 14-month low for August. Steadily deteriorating economic landscape in the Euro zone and persistent geopolitical fears in Eastern Europe seem to be hurting the overall business climate in Germany. With no major economic releases across Europe, investors will keep a close watch on a slew of macro data in the US, considering its potential to alter risk sentiment in the upcoming trading session.

Other Currencies – Highlights

The Kiwi Dollar lost ground against the greenback following the release of trade data in New Zealand earlier today which showed a higher than expected deficit for July. A slowdown in export growth accompanied by a fall in commodity prices and an elevated value of the New Zealand Dollar, weighed on the nation’s trade balance figures. However, losses in the Kiwi Dollar-US Dollar pair were limited as dovish comments from the US Fed Chair last week continued to keep investors uncertain over the timing of an interest rate hike in the world’s largest economy. Separately, the Conference Board’s report released in China earlier today showed that the pace of domestic economic activity remained at a seven month high for July. With no important domestic economic releases scheduled this week, markets will keep a tab on today’s US factory orders data for July and the revised US GDP estimate for the second quarter scheduled tomorrow for further direction to the Kiwi Dollar against the majors.