At home, data just released revealed a more than expected drop in the number of mortgage approvals for August. In this context, the Financial Policy Committee’s quarterly policy statement scheduled this week will be keenly eyed, especially considering mixed housing data in the nation. Given the importance of economic data in deciding the future monetary policy stance, this week’s PMI reports and revised GDP data in the UK will attract increased market attention.
Across the Atlantic, an upward revision to the US GDP data for the second quarter supported the greenback against the majors in Friday’s trading session. Across Europe, today’s German consumer price inflation reading will be closely watched, as disappointing data might heighten speculation for additional stimulus measures.
Pound Sterling – UK Markets
Official data just released indicated that the number of mortgage approvals dropped more than expected for August. However, the reaction in the Pound remained muted and it continued to trade in a tight range against the majors this morning. With the recent housing market data portraying a mixed picture, this week’s quarterly policy statement from the BoE’s Financial Policy Committee will attract considerable market attention to gauge the state of health of the domestic housing market. Furthermore, the GfK consumer confidence report scheduled overnight along with tomorrow’s revised second quarter GDP numbers will be keenly eyed. With the BoE Governor, Mark Carney, reiterating last week that the timing for raising interest rates in the nation is dependent on the nature of economic data, this week’s PMI reports will keep investors on their toes.
On Friday, the Pound dropped against the US Dollar after the revised GDP data indicated that the US economy expanded at its fastest pace in two and a half years during the second quarter of 2014, thereby pressing the case for an earlier than expected increase in interest rates.
US Dollar – US Markets
The greenback advanced against the majors on Friday following the release of encouraging US GDP numbers which showed an upward revision to the nation’s economic growth for the second quarter. The upside has not only reduced the burden of high expectations from the remaining quarters but was also in contrast to the Fed’s recent downgrade of the nation’s GDP forecast for 2014. Meanwhile, the Reuters/Michigan survey showed a less than expected improvement in consumer confidence for September.
The greenback is likely to take direction from today’s US macro data for August. Consumer spending is anticipated to rebound, despite most releases last month indicating that the nation’s economic performance remained lacklustre. Separately, pending home sales is expected to show a drop for August. However, with the recent US housing market data showing mixed signs, these numbers are unlikely to cause any major movement in the US Dollar. Additionally, markets will keep a tab on this week’s US non-farm payrolls report to gauge for signs of improvement as the Fed’s bond buying programme is expected to end next month.
Euro – European Markets
The Euro is trading in a tight range against the majors this morning ahead of today’s German consumer inflation numbers which is likely to show that inflation remained at lower levels for September. With deflationary concerns haunting the region, any further weakness in inflation in Germany might strengthen prospects of additional stimulus measures in the Euro zone, particularly after last week’s dovish comments from the ECB President. Additionally, various Euro zone surveys scheduled later today are expected to show deterioration in sentiment among consumers and businesses for September. Furthermore, the upside in the common currency looks limited today after data revealed that industrial profits in China rose at a slower pace for August. Going forward, the ECB policy meeting scheduled later this week will attract significant market attention for more details about the central bank’s asset purchase programme for next month.
The Euro was under pressure against the US Dollar in Friday’s trading session and fell below the 1.27 mark after data indicated that the GfK consumer confidence index dropped more than expected for October.
Other Currencies – Highlights
The Japanese Yen lost ground against the greenback in Friday’s trading session following the release of encouraging revised US GDP data for the second quarter. Going forward today, crucial domestic macro data scheduled overnight will generate considerable market attention for further direction to the Japanese Yen against the majors. Japan’s household spending is anticipated to report a fifth consecutive drop for August despite the Bank of Japan Governor, Haruhiko Kuroda, reiterating on several occasions that the impact of April sales tax rise is fading away. Furthermore, markets will keep a tab on the domestic unemployment rate for August which has already shown two unexpected downsides since the sales tax increase in April 2014.
The US Dollar-Japanese Yen pair is also anticipated to witness some volatility ahead of consumer spending and pending home sales data in the US scheduled later today.