The Pound has benefitted from the US Dollar’s drop on fears that a spike in inflation could force the Federal Reserve to raise interest rates more aggressively in 2018. In today’s major UK economic release, the British Bankers Association Mortgage Approvals data fell slightly short of both the expected and previous figures. The figure represents a 15-month low in UK mortgage approvals by High Street Banks.

The Dollar fell to four-week lows against most major currencies after 10-year Treasury yields fell by the biggest drop in over three months, yesterday. The US Dollar’s weakness has helped to fuel the surge in the price of copper which is selling at levels not seen since over three years. While the economic calendar for Europe is very light this week, several data releases are due out of the US later today. If the data is weak, as was yesterday’s consumer confidence reading, the Dollar could fall slightly lower.

Pound Sterling – UK Markets

The Pound is gaining ground against the weak US Dollar with the exchange rate rising to $1.34. Sterling is also performing well against the Euro with the exchange rate set at €1.12.

British Bankers Association(BBA) Mortgage Approvals figures were released today, indicating the UK housing market is contracting slightly. The number of loans that are approved for home purchases is a leading indicator of the strength of the UK’s housing market. In November of 2016, there were 41,702 mortgage approvals. This November the number of home purchase loans decreased to 39,507, indicating that the market is cooling slightly.

According to a report by The Centre for Economics and Business Research (Cebr) released yesterday, in 2018, India appears set to “leapfrog” the UK and France as the world’s fifth-largest economy. Noting setbacks such as restrictions on large banknotes that have slowed India’s growth, India’s economy will have “become the fifth largest economy in Dollar terms,” said Douglas McWilliams, Cebr deputy Chairman. The consultancy believes that Brexit will be less damaging to the UK’s economy than had been previously thought and, accordingly, the UK’s economy is expected to overtake France’s once again in 2020.

A study by the jobs search engine Adzuna reveals the average salary for positions available online in November increased by 1.2% compared to a year ago for the same month. Across the UK, the average annual salary advertised in November was £32,598, while London salaries rose by a 2.2% over the previous year to £39,457.

US Dollar – US Markets

The US Dollar has slumped to a four-week low, falling against the Euro with the exchange rate down to €0.83. The US Dollar Index (DXY) fell to a figure of 92.74. Later today, the US Trade Balance figures for November will be released.

Yesterday, the US Consumer Confidence index for December dropped down to a reading of 122.1 after November’s figure of 129.5 which was the highest figure recorded in 17 years. Responding to the release made by The Conference Board, Lynn Franco, the Director of Economic Indicators commented, “The decline in confidence was fuelled by a somewhat less optimistic outlook for business and job prospects in the coming months.”

Initial and Continuing Jobless Claims are scheduled for release later today with both expected to show fewer jobless claims in December. On 21 December, Initial Jobless claims climbed by 20,000 more than the expected figure of 231,000. A Labour Department official noted that processing claims had yet to return to normal in Puerto Rico and the Virgin Islands due to disruptions caused by hurricanes that are still impacted those US islands.

Euro – European Markets

The Euro has benefitted from the US Dollar falling, with the exchange rate rising to $1.19. The Euro has weakened to the Pound with the exchange rate set at €0.88. The most important release for the European economic calendar this week is Germany’s Harmonised Index of Consumer Prices which is due out tomorrow.

The European markets remain quiet today, however, the European Economic Bulletin for December was released this morning. The European Central Bank (ECB) publishes its Economic Bullet two weeks after the central bank holds its Governing Council meeting. The ECB notes that Eurozone economic expansion is solid and broad-based with very favourable financing conditions. Although underlying inflation is expected to rise gradually, the central bank still believes monetary accommodation is necessary to bring inflation closer to 2%. This is why the ECB confirms that it will continue its Quantative Easing programme until at least the end of September.

In Greece, a poll conducted by MRB Hellas for the Real News newspaper shows that 66.3% of Greek respondents expect international monitoring of Greek finances will continue even after the bailout programme officially expires in August 2018. After 7 years of austerity cuts that have kept the debt-stricken country afloat, only 17% of Greeks believe Greece will make a “clean exit” and return to international capital markets rather than rely on borrowed funds. Prime minister Alexis Tsipras has said that Athens will complete a compliance review with time to locate a cash buffer that would allow Greece to return to markets and start debt relief discussions before the summer. Only one in four Greeks believe the country will return to markets, according to the survey.

Other Currencies – Highlights

Sterling picked up a little ground against the Australian Dollar, trading at 1.72 AUD, against a strong Aussie Dollar due to an increase in the price of oil and commodities. Yesterday, copper prices spiked to their highest levels in three and ½ years. Copper is traditionally a leading indicator of worldwide growth and it’s rise helped support the currencies of commodity exporting countries, such as Australia.

The Pound is trading a little higher against the New Zealand Dollar, exchanging at 1.89 NZD. The Centre for Economics and Business research predicts that New Zealand’s economy will expand by 3.5% by the end of this year and 3% in 2018. This moves the country up the scale of economic rankings from the world’s 52th place to the 51st.

Sterling lost strength against the Japanese Yen, exchanging at 151.91¥. Yesterday’s data releases included November Large Retailer’s Sales and Retail Trade figures which surpassed expectations, coming in at 1.4% and 2.2%, respectively. November’s Industrial Production missed the expected 6.0% figure for the year-on year reading by dropping to only 3.7%.