UK Mortgage Lending Rises Most Since 2008
The pace of notable economic releases has picked up today, starting with the just out data which showed that British mortgage lending recorded the largest increase since May 2008. The number of home loan approvals rose above expectations, adding to evidence that the UK housing market is strengthening. In the session ahead, a CBI survey will offer an early clue on UK retail spending for September which will be followed by the Conference Board’s measure of consumer confidence in the US.
In Europe, German preliminary CPI print and Euro zone’s business sentiment data scheduled later today will attract significant market attention.
Pound Sterling – UK Markets
Data released just now showed that mortgage approvals in the UK rose more than market estimates for August, in sync with last weeks’ sharp increase in the corresponding BBA measure. Additionally, another data revealed that mortgage lending in the UK posted its largest rise since 2008. The recovery in mortgage approvals for house purchases during recent months, underpinned by income growth and rising consumer confidence, points toward further improvement in the housing market activity outlook. The upbeat home loan approvals data has boosted the appeal of the Pound and initiated a rebound in Sterling – US Dollar currency pair this morning. Meanwhile, official figures revealed that the amount of credit borrowed by individuals unexpectedly dropped for August. Later today, the latest CBI retail sales numbers is anticipated to show a further improvement for September.
Meanwhile, a speech by the BoE Governor Mark Carney later tonight could offer fresh insights on whether recent financial market volatility and renewed global growth concerns have affected the timing of the first UK policy rate increase.
US Dollar – US Markets
The US Dollar is trading lower against the Pound this morning, amid mounting concerns about the extent to which China’s lower commodity prices and slowing growth will impact US inflationary prospects. A slowing China could also possibly affect the US Federal Reserve’s views to raise its interest rates this year. Meanwhile, the Fed officials yesterday were once again insistent that a rate rise this year was more likely and that lower oil prices and strength of the US Dollar were transitory in the context of the overall decision. The New York Fed President, William Dudley stated that the first interest rate rise could come as soon as October as policymakers takes note of an improving US economy. Meanwhile, US inflationary pressures were again in question yesterday after core personal consumption data showed that the key index was relatively flat for August.
In the session ahead, today’s update from the Conference Board is anticipated to show that consumer morale softened in September which follows a sharp slide seen in University of Michigan’s confidence measure for the same month last week.
Euro – European Markets
The shared currency has currently given back part of its early morning gains against its major currency counterparts. Meanwhile, data released earlier in the day showed that Spain’s retail sales grew at a slower pace than anticipated for August, while flash CPI print revealed that Spanish consumer prices declined more than expected in September due to lower electricity and fuel prices. Later today, traders will look forward to the release of German preliminary consumer prices data for September. Markets anticipate that deflationary price pressures will recur in the Euro zone’s largest economy for September, thus intensifying pressure on BoE Chief Mario Draghi for further easing of the monetary policy. Prospects of a further extension of ECB’s QE programme would rise if data from the Euro zone tomorrow shows weak price pressures. An update on business and consumer sentiment is also due in the Euro zone today.
Yesterday, data showed that Italy’s consumer confidence and business confidence reached its highest level in more than two years for September.
Other Currencies – Highlights
The Canadian Dollar has currently recovered some part of its losses against the greenback, though the US Dollar – Canadian Dollar currency pair continues to hover close to multi year highs. The Loonie was dragged sharply lower against the US Dollar recently as macroeconomic headwinds hurt commodity prices following weak Chinese economic data. Also, talks of a potential US interest rate rise occurring before the end of the year is gaining traction following hawkish speeches by Fed officials in the last few days.
On the macroeconomic front, investors will keep a tab on Canada’s industrial product prices and raw material price index alongside US economic releases including Conference Board’s report on consumer confidence and S&P/Case- Shiller’s home prices indices scheduled later today for further direction. Going forward, Canada’s growth figures for July due tomorrow will likely spur further moves in the Loonie Dollar pair, although any unusual slide or rise in the price of gold and oil could impact demand for the Canadian Dollar.