UK Home Loan Approvals Rise
The just out mortgage approvals recorded a lower than expected rise for May. Considering that approvals had risen at a nine-month high in April, any rise in May strengthens hopes that the domestic housing market remains healthy. In the US, the final reading of first quarter GDP is anticipated to show a smaller contraction in growth from the earlier estimate.
Meanwhile, Greece continues to draw market attention, with Euro group officials expected to meet today to discuss the latest set of proposals before the final reform package is considered in the summit tomorrow. In economic news, German current conditions and sentiment index fell in June, amid signs that uncertainty over the Greek debt crisis has clouded the outlook.
Pound Sterling – UK Markets
Just released data showed that mortgage approvals for home purchases were slightly lower than market consensus. Low mortgage rates and growing confidence among home buyers, if sustained, is likely to add to signs that demand for home loans will continue to be robust in the coming months. In the morning session, the Pound has recovered part of its previous session losses and has edged higher against the US Dollar.
Sterling traded at multi week lows against the US Dollar yesterday and came under renewed pressure after the Confederation of British Industry’s industrial trends survey showed that factory orders in the nation for June grew at its weakest pace in almost two years, led by a fall in export demand. The CBI indicated that the strengthening Pound has adversely impacted UK manufacturers’ overseas sales and margins, while the uncertainty surrounding the Greek debt crisis has weakened demand in the European market.
US Dollar – US Markets
The US Dollar is trading on a weaker footing against its major peers this morning, ahead of the final reading of first quarter GDP in the US later today. Markets anticipate a lower than previously reported contraction for the first three months of the year, reflecting stronger consumer spending given the upward revision to March’s core retail sales, real income growth and household wealth gains through residential investment. Also, the US Fed’s preferred inflation gauge, the personal consumption expenditure index for the first quarter of 2015 is expected to remain unchanged from the advance estimate.
Sentiment towards the greenback improved yesterday after data showed that sales of new single-family homes in May surged at the fastest pace in more than seven years. This week’s updates on home sales in the US suggests upward momentum in the housing market and hints at increased demand and rising home building activity in the coming months. Meanwhile, the initial print of the nation’s manufacturing sector indicated that factory activity slightly lost impetus at the end of the second quarter.
Euro – European Markets
The shared currency is trading higher against the US Dollar this morning, recovering from the previous sharp losses, as a deal between Greece and its international creditors appears forthcoming. European Union leaders will meet tomorrow for a second summit this week, where ministers are expected to approve Athens’s new reform proposal and unlock funds to avert the nation’s debt default.
The flash private sector PMI readings for the Euro zone and its two largest economies yesterday showed that business activity expanded in June, signaling that recovery in the Euro area has gained traction despite the Greek debt crisis weighing on sentiment. However, the latest update from the Ifo Institute showed a decline in Germany’s current and expectations benchmark index for June. The current climate reading marked the first retreat since February 2015. A modest dip was widely expected at this stage, as Greek debt concerns are likely to have softened sentiment. Additionally, the final GDP data from France confirmed a strong pickup in growth for the first quarter of the year.
Other Currencies – Highlights
The Bank of Japan’s minutes from the latest monetary policy meeting revealed that the board, excluding one member, voted to leave the benchmark interest rate steady and to maintain the central bank’s target of raising the monetary base at an annual pace of about JPY80 trillion. The BoJ had previously introduced additional stimulus last October, citing significant downward pressure from falling crude prices that had hindered its ability to achieve its desired inflation target. Policy makers noted that the aggressive easing measures are having the desired impact and that the nation is expected to continue to recover moderately. However, the minutes had a limited impact on trading in the Japanese Yen.
The US Dollar–Yen currency pair is currently trading in a tight range. Investors now eagerly look forward to the third estimate of GDP data in the US for further direction.