Sterling Steady as Dollar Rebounds
The Pound has lost a little ground to the US Dollar, today, as the Dollar recovers from a three-year low. UK house prices have risen by more than expected, according to today’s release by Rightmove who report record levels of house hunting in January. Later today, a speech by Bank of England governor Mark Carney may give Sterling a boost if Carney comments on plans to raise interest rates. In the week ahead, Wednesday’s wage and unemployment data will be the most significant economic releases for the Pound. Also, the Prime minister is expected to provide further clarity on Brexit in her speech following the cabinet meeting at Chequers.
The US Dollar has lifted slightly from recent weakness that was caused by a series of economic concerns. Investors are still uncertain about the possibility that the US is pursuing a strategy to weaken the Dollar in effort to stimulate exports. Also, there are rising concerns over the $1trillion budget deficit in 2019 as well as the consequences of the Trump administration’s plan to rebuild US infrastructure.
Pound Sterling – UK Markets
The Pound has slipped a little against the US Dollar, with the exchange rate at $1.40. Sterling is also slightly lower against the Euro, exchanging at €1.12.
Average UK house prices rose by £2,400 in a month, according to today’s release by Rightmove. January was Rightmove’s “busiest month ever,” as prices were up by 8%, exceeding the forecast of an increase of 7%. Annually, prices were up by 1.5%. The average price of a UK property is £300,001, while the average time to sell a property has increased to 72 days, up from 55 days last summer.
The chances of a young adult on a middle income owning their own home in the UK have more than halved in the past 20 years, according to research from the Institute for Fiscal Studies (IFS). House prices rising above wage growth has caused the proportion of 25-to 34-year olds earning between £22,200 and £30,600 per year who own their own home to fall to 27% in 2016 from 65% two decades ago.
The head of the British Chambers of Commerce (BCC) has warned the government that UK companies are facing a recruitment crisis. BCC director general Adam Marshall has urged the government to produce details of Britain’s post-Brexit immigration policy, warning against instituting “draconian and damaging” visa or work permit systems. BCC surveys show that nearly three-quarters of firms trying to recruit experienced challenges “at or near the highest levels” in the 25 years since BCC records began.
Later today, the Bank of England’s governor Mark Carney will be delivering a speech in London that will be closely watched for insights regarding plans to raise interest rates. On Wednesday, wage growth and inflation will be in focus, while the UK’s GDP for the last quarter of 2017 will be seen on Thursday.
US Dollar – US Markets
The Euro is steady against the US Dollar, exchanging at $1.24. The US Dollar Index (DXY), which measures the strength of the Dollar against six major competitor currencies, is up, at 89.1.
The US Housing Starts for January show the construction sector has expanded by 7%, annually, with 1.326million units added. This is a strong improvement over the expected figure of 1.234million units and a rebound from December’s figure of 1.209million units which was revised higher than the initial 1.192million units reported. The Housing Starts Change for January also came in high, at 9.7%, exceeding a 3.4% forecast.
Building Permits hit a 10½year high for January, smashing expectation of a 3.5% increase, by coming in at 7.4%. This was a strong recovery from the sharp decline of 0.1% in December, which was caused by poor weather. As demand for single family housing is outstripping supply, house prices are rising and builders are steadily increasing construction of single family homes.
US import prices rose by 1% last month, beating estimates for an increase of 0.6% after December’s 0.1% rise. This is yet another indicator of rising inflation, following 0.4% higher producer prices in last week’s Producer Price Index.
Today, there is no economic data due for release from the US, and the markets are closed due to the Presidents Day holiday. This week will be fairly quiet regarding data, until Wednesday, 21 February when the Federal Open Market Committee (FOMC) Minutes will clarify the future interest rate intentions for the US. Also Wednesday, the IHS Markit Services and Manufacturing Purchasing Managers Indices are out.
Euro – European Markets
The Euro is holding steady against the Pound, with the exchange rate set at £0.88.
European Central Bank (ECB) governing council member Benoit Coeure has said that the central bank will not raise its interest rates before it concludes its bond buying programme. Coeure said that, so far, the ECB had not yet discussed changing the central bank’s communication on monetary policy, which will be changed following ECB discussions in early 2018.
Today, the Eurozone’s 19 finance ministers meet in Brussels to discuss candidates for the next vice president of the European Central Bank (ECB). ECB deputy Vitor Constancio holds one of the four of six executive board positions that will be reshuffled by the end of 2019. When current ECB president Mario Draghi steps down in October 2019, these new board members, and a new ECB president, will preside over unwinding the stimulus programme. German ECB governing council member Jens Weidmann has been ranked by a Bloomberg survey of economists as Draghi’s most likely successor, so far.
Other Currencies – Highlights
Sterling has fallen against the Australian Dollar, with the exchange rate at 1.76 AUD. The Commonwealth Bank (CBA) has said that the trend in weak house price growth in Australia will continue through the year. Record new apartment supply in the three largest cities are among the factors CBA cited that will restrain prices into next year.
The Pound is lower against the New Zealand Dollar, exchanging at 1.89 NZD. New Zealand’s producer inflation will be seen later today when the Producer Price Input and Output Indices for the fourth quarter of 2017 will be released by Statistics New Zealand.
The Pound is stronger against the Japanese Yen, exchanging at 149.38¥. Japan had its first trade deficit in 8 months in January, which was attributed to seasonal factors. The deficit totalled 943.4trillion ¥, as imports rose 8% year-on-year and exports climbed by 12%.