Rightmove Indicates UK House Prices Rise
Today’s Rightmove survey showed that house prices in Britain rose for February, keeping the Pound supported. However, the main focus among traders is likely to be on tomorrow’s consumer price inflation data in the UK, especially after the BoE recently hinted at prospects of a fall in domestic consumer prices in the near term.
Across the Atlantic, Friday’s preliminary Reuters/Michigan survey revealed that consumer morale deteriorated unexpectedly for February as households were less optimistic about the current, as well near term, outlook for the US economy. In the Euro zone, the international trade report for December will be eyed today, particularly after Friday’s preliminary data showed that economic growth in the region was stronger than expected for the last quarter of 2014.
Pound Sterling – UK Markets
On Friday, the Pound gained ground against the Euro as investors shrugged off Euro zone’s upbeat preliminary GDP data, amid lingering concerns about Greece’s exit from the Euro bloc. Additionally, Mark Carney’s mildly hawkish tone last week kept Sterling supported against the majors. Separately, data released in the UK revealed that construction output rose in line with market estimates for December, albeit at a slower pace from the prior month. The deceleration was led by a fall in repair and maintenance activities, although the drop was partly offset by an increase in new building constructions.
The Rightmove survey released earlier today, while indicating that UK house prices rose for February, revealed a shortage in properties for sale. Considering that housing market gauges in the nation have been mixed of late, uncertainty among investors about the health of Britain’s real estate sector is likely to continue. The Pound is trading on a firmer footing against the greenback this morning. Moving ahead, tomorrow’s consumer prices inflation report in the UK will be keenly eyed, particularly after the BoE lowered its short term inflation forecast last week.
US Dollar – US Markets
On Friday, the greenback was mixed against the majors following an unexpectedly sharp decline in the Reuters/Michigan consumer sentiment index in the US. The details of the print showed that households were less optimistic about current economic conditions as well as the outlook over the next six months. What is particularly worrying is the fear among consumers that incomes could decline and their preference for savings over spending. This probably helps to rationalise the recent disappointing retails sales numbers in the US despite the upbeat job additions, the strength in wage growth and cheaper fuel prices.
With US markets closed today for President’s day, the US Dollar is trading in a tight range against its key peers. Going forward, market participants will eye the minutes of the last FOMC meeting due on Wednesday for further direction to the greenback’s movement against its key peers. Following the robust labour market reports recently, it is likely that the US Federal Reserve will maintain hinting for a mid-year interest rate rise.
Euro – European Markets
The Euro gained ground against the US Dollar on Friday after data showed that US consumer sentiment unexpectedly declined for February. Meanwhile, the flash GDP data from Germany revealed that its economy grew substantially higher than market expectations. The Euro was further supported as the Euro zone economy expanded more than market anticipation. The upbeat growth data from the Euro zone is particularly significant given that the ECB is about to start its bond buying plan and raises hopes that the quantitative easing programme would support an already underlying recovery in the economy.
The Euro is trading higher against the majors this morning ahead of the Euro zone’s trade balance data for December scheduled later today. Meanwhile, investor focus will be on the Euro zone finance ministers' meeting, with expectations that Greece will be able to reach an agreement with its regional partners. Any adverse outcome would raise concerns about Greece’s stay in the Euro zone and increase volatility in the Euro. Going forward, traders will eye tomorrow’s German ZEW morale survey which is expected to show an improvement for February.
Other Currencies – Highlights
The Japanese Yen is trading higher against the greenback this morning after Japan’s preliminary GDP data showed that the economy emerged from a recession to register a growth in the fourth quarter, albeit less than market expectations. Meanwhile, the final reading of industrial production showed that the measure grew less than the preliminary reading.
Yesterday’s GDP report and today’s industrial production data have raised expectations that the nation’s economy is on the path of recovery. Going forward, investors will eye the Bank of Japan’s monetary policy meeting on 18 February 2015 to gauge the central bank’s stance on additional stimulus. After recent macro releases, the BoJ is expected to maintain its current stance as economic recovery in the nation seems to be on track.