Sterling Rallies Against Euro
The Pound rallied against the Euro today, after yesterday’s slump to an eight-year low. Mortgage approvals hit a 16-month high in July, while consumer credit in the UK rose less than expected, according to data released by the Bank of England (BoE). Theresa May is visiting Japan in an effort to prepare the ground for future trade relations with the country of the rising sun and show what British businesses are capable of.
In the US, economists are expecting the release of the country’s GDP data for the second quarter of 2017. President Donald Trump is also expected to talk about his tax reform plan in a speech in Missouri later in the day. In the Eurozone, a survey by the European Commission (EC) showed that confidence in industry and among consumers is on levels not seen in the last ten years.
Pound Sterling – UK Markets
Today, the Pound strengthened against the Euro with the exchange rate set at €1.08. Sterling remained stable against the US Dollar with the exchange rate set at $1.29. The BoE published data regarding mortgage approvals and consumer credit in July.
Starting from mortgage approvals, data showed that they rose to a sixteen-month high in the second month of the summer, beyond market expectations. However, some economists expressed their doubts on whether a significant increase in the number of mortgage approvals could mark the start of the UK housing market’s upturn. Among them Howard Archer, chief economic adviser to EY ITEMClub, suggests that the latest survey evidence is “largely lacklustre.”
According to BoE’s data, unsecured UK consumer credit growth slowed to 9.8%, which is a fifteen-month low. Economists highlighted the £8.9bn increase in non-financial corporate borrowing, which, as they suggested, could be a sign that companies are considering spending more money. Not all analysts agree with this view, as some of them believe that it doesn’t comply with the decline in business confidence, which previous surveys showed. They suggest that corporate borrowing spiked because firms are fearing potential higher interest rates in the future and try to lock in low borrowing costs.
US Dollar – US Markets
The US Dollar gained a bit of ground against the Euro with the exchange rate set at €0.83. In general, the US currency regained strength against its competitors, after slumping yesterday on news of the new North Korean ballistic missile test. The US Dollar Index (DXY) gained 0.12% in value coming in at 92.50. As a reminder, the DXY hit a two and a half year low yesterday.
President Donald Trump is expected to unveil his vision for the long-awaited tax reform. According to Politico, the US President is expected to discuss lower rates for middle-income taxpayers as a substitute for pay rises. He is expected to say that corporate tax rates should be lowered, in order to help the US companies expand and face the competition. Trump’s speech in Missouri has been prepared by Stephen Miller, a top nationalist White House aide.
A survey by the New York-based Conference Board showed that, in July, US consumer confidence picked up to the second highest level since the last months of 2000. Economists suggest that the survey’s results indicated that household confidence remains on a strong footing and could help increase consumer spending in the third quarter of 2017.
Euro – European Markets
The Euro dipped against the US Dollar, losing the $1.20 mark, with the exchange rate set at $1.19. The Euro was unable to resist the strengthening of the Dollar, due to a pick-up in demand for the US currency. A series of upbeat data regarding the Economic Sentiment Indicator, the Industrial Confidence and the Services Sentiment in the Eurozone didn’t seem to help the single market currency either.
The Eurozone’s Economic Sentiment Indicator, published by the EC, hit a ten-year high as the index rose to 111.9, much better than the anticipated 111.3. The improved figure shows that consumers in the Eurozone bloc feel optimistic about the economy. The figure for the European Union as a whole came a bit lower than the ten-year high it hit on July.
Later in the afternoon, the German and Spanish preliminary inflation data is expected to be released. Analysts at Danske Bank suggest that, in both countries, inflation is expected to be above 1.5% and close to the European Central Bank’s target of 2%. However, experts think that because the French and Italian figures are closer to 1%, the ECB will stay patient regarding the issue of interest rates, also taking into consideration the stronger Euro.
Other Currencies – Highlights
The Pound slumped against the Australian Dollar, trading at 1.62 AUD. The Australian Bureau of Statistics (ABS) released data which showed that building approvals for July declined by 1.7%, on a monthly basis, better than the anticipated 5% decline. Overall, building approvals are down 13.9% on a year-to-year basis, above expectations of a 16.6% drop. Westpac economists say that it remains to be seen if, in the next few months, the apparent upturn in non-high rise segments continues and if high rise construction declined further.
Sterling retained its value against the New Zealand Dollar, trading at 1.78 NZD. Graeme Wheeler, the Governor of the Reserve Bank of New Zealand (RBNZ), delivered a speech in Auckland during which he said that a lower, in value, New Zealand Dollar is needed to help exports and push up inflation. Wheeler talked against the idea of the prime minister Bill English for the removal of the loan-to-value lending restrictions (LVRs), which could seriously affect the housing market. “Their removal would require a degree of confidence that financial stability risks won’t deteriorate again,” said Wheeler.
The Pound fell against the Swiss Franc, trading at 1.23 CHF. The UBS Consumption Indicator came in at 1.38, unchanged in July, and didn’t seem to affect the Swiss currency. The indicator, published by UBS, a Swiss global financial services company based in Zurich, includes all private consumption trends which are important components of the Swiss GDP.