UK Mortgage Approvals Exceed Forecasts
Across the Atlantic, investor focus will be on durable goods orders figures for July with total bookings expected to have dipped. Later in the day, markets will closely monitor New York Fed president and FOMC voting member, William Dudley’s speech for insights into his views on monetary policy, given the recent events in China.
Just out data from the British Bankers' Association shows that home loan approvals in the UK rose more than market forecasts for July. Moving ahead, the CBI’s distributive trade survey due in a few hours will be used to gauge growth in retail spending for August, ahead ofupcoming hard data on UK retail sales.
Pound Sterling – UK Markets
The just released figures by the BBA have revealed that mortgage approvals in the UK rose slightly higher than market consensus for July, signalling that momentum in the domestic housing market remains robust. As households take advantage of record low mortgage rates in the nation, an improvement in today’s home loan approval numbers highlights that wage increases and a rise in employment prospects might have played a part in stoking housing demand in Britain. Moreover, the BoE Governor’s recent remarks that a rate rise could occur around the turn of the year is expected to have pushed homebuyers to secure a loan before the curtain comes down on low borrowing rates. The Pound is trading on a firmer footing against the Euro, recovering some of its early session losses against the common currency. Moving ahead, the CBI’s distributive trade survey is due shortly, which is likely to shed light on early retail spending for August.
The Pound–US Dollar currency pair slipped below the 1.57 mark yesterday, as better than expected US consumer confidence data boosted expectations that the US Fed might raise rates this year.
US Dollar – US Markets
The US Dollar has partly regained lost ground against the Pound and is trading on a stronger footing against the shared currency this morning. Markets have managed to regain composure amid improvement in overall investor sentiment following the Chinese central bank’s efforts yesterday to spur growth in its economy.
Today, an update on big ticket goods orders could trigger volatility in the US Dollar against its key peers. Markets anticipate another lacklustre durable goods order print for July, with the headline figures estimated to have slipped again into negative territory against somewhat strong gains in June. The core capital goods orders component is expected to post a moderate increase, similar to June. Worse than expected core durable orders data could push expectations of a rise in interest rates further into the future, while a positive print could strengthen expectations of monetary policy firming, especially if China’s interest rate cut is able to stabilise markets across the globe. Investors will also note the weekly mortgage applications data, due later today, for further guidance in assessing the strength of the US housing market.
Euro – European Markets
The Euro traded lower against its major currency counterparts in the latter part of yesterday’s trading session, reversing most of its gains. Volatility in trading in the global currency market eased after the People’s Bank of China announced steps to support the Chinese economy. Meanwhile, losses in the Euro were capped after the revised German GDP data was in line with flash estimates for the second quarter, supported by strong export trade. In addition, a closely scrutinised Ifo survey indicated that German business optimism improved unexpectedly for August, however, it also highlighted risks that a further slowdown in China’s economic growth might adversely impact exports from the Euro zone’s largest economy later in the year.
This morning, the Euro is trading broadly weaker against the US Dollar and Sterling. In the absence of any major macroeconomic indicators in the single currency union today, trading in the Euro against its key peers will mostly be determined by global cues.
Other Currencies – Highlights
Currently, the Australian Dollar–US Dollar currency pair is hovering close to the 0.71 mark, as the home currency struggles to regain lost ground against the greenback. Earlier in the day, RBA Governor Glenn Stevens’s remarks on the nation’s economic growth failed to lift the Aussie Dollar against the greenback. Speaking at the National Reform Summit today, the RBA Governor stated that interest rate cuts by the Australian central bank alone could not generate desirable economic growth and added that potential growth could be a bit lower than anticipated. The RBA had cut its cash rate twice this year, in February and May, to a record low of 2% and his comments today hint that the RBA is unlikely to go for more interest rate cuts in the near term.
Meanwhile, economic data released earlier today indicated that activity in Australia’s construction sector unexpectedly rebounded for the April–June period. However, the upbeat construction output data had little influence on trading in the Australian Dollar against the US Dollar.