Mortgage Approvals in the UK Rise

In sync with last week’s BBA mortgage approvals data, today’s official numbers have revealed a more than expected rise in the demand for new loans for June. Meanwhile, the BoE Deputy Governor, Ben Broadbent, indicated that the strengthening global economy will boost domestic economic recovery. Against this backdrop, a slew of economic releases in the US and Europe due later this week will keep investors interested. Across the Atlantic, today’s S&P/Case-Shiller home prices report will be keenly watched as a revival in the housing sector seems to be disappointing, further evidenced by yesterday’s dismal pending home sales data. Meanwhile, tensions in Eastern Europe are set to rise, especially after the EU and the US agreed to impose tougher economic sanctions against Russia.

Pound Sterling – UK Markets

Yesterday, the IMF exercised caution and warned that the overvalued domestic currency is preventing the economy from rebalancing. However, the BoE Deputy Governor, Ben Broadbent, in his speech earlier today, rebuffed the IMF’s concerns and stated that the current account deficit does not pose any risk and opined that the pace of growth in the global economy might help strengthen domestic economic recovery. This notion was further strengthened after data just out indicated that mortgage approvals in the nation rose more than expected for June, thereby pushing the Pound marginally higher against its major counterparts this morning. Although mortgage approvals data showed an improvement, investors’ sentiment remained fairly subdued towards the housing market amid weakness indicated by the recent RICS and Hometrack surveys. With no other major economic data in the UK today, the US consumer confidence report will be keenly eyed as it has the potential to alter risk sentiment towards the Pound in the upcoming trading session.

US Dollar – US Markets

Having witnessed a fairly subdued trading session yesterday, traders look set for more of the same in the session ahead. Market participants remain on the sidelines as the upcoming week holds some crucial economic events in the US which could possibly direct the near term trend of the greenback against the majors. The two-day FOMC meeting commences today, with investors looking for some hints on the probable timeline for an interest rate hike in the world’s largest economy. Tomorrow’s second-quarter GDP report is likely to aid market perception of a sooner than expected policy tightening as the economy is expected to show a sharp rebound for the second quarter. Yesterday, the US Dollar remained in a tight range against the majors. Data indicated that US pending home sales dropped unexpectedly for June, thereby pointing that recovery in the residential real estate continues to remain shaky. Against this backdrop, investors will keep a close watch on today’s S&P Case-Shiller home prices data for further direction. Additionally, US consumer confidence data will attract modest market attention for further direction.

Euro – European Markets

The Euro is trading in a tight range against most of its major counterparts this morning, as investors in the Euro preferred to remain on the sidelines ahead of tomorrow’s German inflation figures and Euro zone inflation data due later this week to gauge the inflationary trend prevalent in the Euro bloc. Markets will scruntise these figures to ascertain the impact of last month’s unprecedented policy measures unveiled by the ECB, mainly in the wake of comments from the ECB Vice President over the weekend that these measures were sufficient to improve inflation in the region. Additionally, a string of US crucial macro releases, especially GDP and non-farm payrolls data along with the US FOMC meeting will keep investors interested. In a noteworthy development, the EU and the US have agreed to impose additional economic sanctions against Russia that would target financial, energy and military sectors and might come as early as this week. The Euro was range bound against the US Dollar yesterday. However, data indicated that US pending home sales dropped unexpectedly for June, thereby denting hopes of a revival in the housing sector.

Other Currencies – Highlights

The Japanese Yen is trading lower against the greenback following the release of soft domestic economic data. Data showed that the unemployment rate in Japan rose unexpectedly for June, although labour shortage in construction and retail sectors improved the availability of jobs in the nation. The recent volatility in the Japanese labour market could potentially be an impact of the sales tax hike in April and further data needs to scrutinised to ascertain any serious threats to the nation’s jobs market. Moreover, another report revealed that Japanese retail sales declined for the third consecutive month for June, further pressurising the Japanese Yen against the majors. However, losses in the Japanese Yen were capped after data indicated a less than expected deterioration in the nation’s household spending. With no other domestic macro data scheduled today, markets will eye a raft of US economic data scheduled this week for further direction to the Japanese Yen. Additionally, some important domestic data, including industrial production and housing starts, due later this week will keep market participants in the Japanese Yen interested.