UK Banks Reduce Unsecured Credit
Sterling dropped against both the US Dollar and the Euro for a second day, trading at $1.34 and €1.12 respectively. A Credit Conditions Survey for the last quarter of the previous year revealed that the UK banks complied with the Bank of England’s (BoE) instructions, reducing the unsecured credit availability. A sharp drop in demand for unsecured loans was also reported.
In Europe, data published this morning showed that the Eurozone’s industrial production rose by 1.0% in November, surpassing expectations. However, economists noted that the Euro-bloc’s GDP expansion in the fourth quarter won’t be as strong as the third. The Chinese dismissed a Bloomberg report, which said that they will halt purchases of US Treasury bonds as “fake news.”
Pound Sterling – UK Markets
Today, the Pound dipped against the US Dollar, with the exchange rate set at $1.34. Sterling also fell against the Euro, with the exchange rate set at €1.12.
The BoE published its Credit Conditions Survey for the fourth quarter of 2017. The survey showed that UK banks are expecting a significant squeeze on unsecured debt to households in 2018. The results of the survey also indicated that banks have reduced unsecured credit availability for four consecutive quarters. The BoE’s policymakers should be happy as last year they had expressed their concerns about the rapid accumulation of credit card debt.
Marks & Spencer, Tesco and John Lewis published their retail sales figures for the Christmas period. Tesco announced that its food sales rose by 3.4% and overall sales by 1.9%, with its chief executive Dave Lewis, noting that “we are firmly on track to deliver our medium-term ambitions.” On the contrary, Marks & Spencer reported a 1.4% drop in retail sales, during the last four months of 2017. John Lewis executives reported a 2.5% rise in gross sales, but warned that maintaining competitive prices despite higher costs, might affect the full-year financial results.
US Dollar – US Markets
The US Dollar surged against the Euro with the exchange rate set at €0.83. The US Dollar Index (DXY), which measures the strength of the Dollar against six major competitor currencies, also picked up coming in at 92.51.
According to a statement by the Chinese State Administration of Foreign Exchange (SAFE), a Bloomberg report which noted that China may halt purchases US Treasury Bonds is based on wrong information. The statement, said that “the news could quote the wrong source of information, or may be fake news.” The report by Bloomberg had worried the markets yesterday, sending the US Dollar lower and the US Treasury yields to ten-months high.
Former Treasury Secretary, Larry Summers, urged the Federal Reserve to fix the problem regarding the failure to reach its 2% inflation target. In his remarks, during a Brookings Institution conference, Summers noted that the Fed lowered interest rates by five percentage points over time, to stimulate the US economy during recessions. The former Secretary, however, stressed that the Fed won’t have the necessary means to face the next recession as “monetary policy won’t have sufficient room to cut rates as much as the Fed would like.”
Euro – European Markets
The Euro dipped against the US Dollar, with the exchange rate set at $1.19. The release of the ECB minutes and data regarding Eurozone’s industrial production dominate the news coming from the continent today.
According to data released by Eurostat, the Eurozone’s industrial production increased in November by 1.0%, on a month-to-month basis. The result exceeded analysts’ expectations who had forecast that the figure would come in at 0.8%. On an annualised basis, the Euro-bloc’s industrial production rose by 3.2%, again more than what economists had anticipated.
The German GDP grew by 2.2% in 2017, according to a preliminary estimate from the Federal Statistics Office. If confirmed, the 2.2% figure constitutes the strongest rate in the last six years. However, economists had forecasted that the German economy would have expanded by 2.4% in the previous year. Carsten Brzeski, chief economist at ING, noted that strong labour market, low inflation and interest rates “helped to push the domestic economy in sixth gear.”
Other Currencies – Highlights
Sterling slumped against the Australian Dollar, trading at 1.71 AUD. The Australian Bureau of Statistics (ABS) released data regarding retail sales in November. According to the report, retail sales rose by 1.2% in November, on a month-to-month basis. The rise was unexpected and made the Aussie hit a three-month high against the US Dollar.
The Pound fell against the New Zealand Dollar, trading at 1.87 NZD. The number of job ads posted in New Zealand in December dropped by 0.3% on a monthly basis. This was the second consecutive month that the number of ads dropped. The annual growth rate eased to 6.1% according to ANZ analysts. In their report they note that wage growth is expected to pick up modestly in 2018.
Sterling retained its value against the Canadian Dollar, trading at 1.69 CAD. A TDS report said that labour market tightness is delivering a broad pickup in wage pressures.