BBA Says Fewest Mortgage Approvals Since May
The just out publication showed that the number of home loan approvals in Britain last month was the fewest since May this year, but the figures were high enough to suggest that customers continued to take advantage of low borrowing rates. Moving ahead, the nation’s industrial trends survey today will provide insights on how the UK manufacturers are faring in the face of weak overseas demand and strength of Sterling.
In Europe, the closely watched German Ifo survey indicated that current business conditions dropped significantly this month, but expectations for future business conditions topped market consensus for October. Across the Atlantic, new home sales figures and Dallas Fed’s factory activity index will set the tone for this week’s economic releases.
Pound Sterling – UK Markets
The Pound lost some ground against the US Dollar on Friday, despite the absence of major data in the UK economy and as the dovish ECB and a surprise rate cut by the PBoC last week led to a broad based strength in the greenback. On the contrary, the Euro – Sterling currency pair slipped below the 0.72 mark in the final session of the previous week.
Meanwhile, this morning, the Pound has recovered from some of its losses against the US Dollar. On the macro front, the British Bankers Association (BBA) earlier today reported that the number of mortgage approvals for house purchases in Britain unexpectedly fell in September, but the borrowing figures were consistent at levels which indicate that recovery in the UK housing market is steady. The BBA data is generally a good precursor to the more comprehensive and more closely monitored BoE lending figures which are due later this week. In sometime, the CBI industrial trends survey data for October is expected to show a further deterioration in total orders and export orders due to a drop in the overseas demand.
US Dollar – US Markets
On Friday, the US Dollar strengthened across the board as a surprise rate cut in China to boost the slowing economy spurred a bit of risk aversion. In addition, the flash estimate of the US manufacturing PMI which rose to five month high for October, suggesting that the manufacturing sector in the world’s largest economy has started to stabilise at the onset of the fourth quarter added to gains in the home currency.
The greenback has given up some of its earlier gains against the Euro this morning. Later today, investors will look forward to a pair of US economic reports which will shed further light on the health of the US economy. A recent run of US housing market related numbers have indicated a healthy recovery in the residential sector. Today’s update on sales of newly built homes will offer another data point for evaluating the state of the housing sector. Against the backdrop of October’s flash PMI survey which suggested recovery in the US manufacturing activity, today’s Dallas Fed index is anticipated to show some easing in the degree of contraction, hinting at the possibility that the worst is over for this corner of the economy.
Euro – European Markets
Trimming its early morning gains, the shared currency is trading in a tight range against the Pound this morning. In a light European calendar day, the Germany Ifo survey readings that were published earlier today received more attention than usual as the Euro zone’s largest economy suffered a rough summer as fears surrounding the slowdown of the Chinese economy mounted. Morale across businesses in Germany was down moderately, though not as low as expected for the current month. The closely watched Ifo measure to assess the current conditions among German businesses ticked way below market projections for October. However, businesses were more upbeat about future prospects than in September, suggesting that the economy remained resilient in the aftermath of the Volkswagen emission scandal.
Last week, the ECB Chief Mario Draghi signalled another round of QE could be in the offing, given the downside risks that the Euro area has been facing. Today’s data has increased the likelihood that the ECB would go ahead with the introduction of a further bout of monetary stimulus to spur growth in the wider economy.
Other Currencies – Highlights
The US Dollar – Canadian Dollar currency pair traded at multi week highs in the final session of last week, amid weaker commodity prices and upon hearing more interest rate cuts in China coupled with the ECB’s plans to extend its current QE programme. Also, disappointing figures by the Bank of Canada (BoC) added to losses in the Canadian Dollar against the greenback. The core measure of consumer prices rose less than expected for September, while on an annual basis, the core inflation rate stood pat at 2.1% in the previous month. The Canadian central bank’s target for core inflation is 2.0% and CPI above that level could forestall any rate cuts and might even push the bank to raise its interest rates in the near term. The BoC had recently left its interest rates unchanged.
The Canadian Dollar has trimmed part of its losses against the greenback this morning. Amid no macroeconomic indicators in Canada today, further direction in the currency pair will be determined by a couple of US data releases and global market sentiment.