Among today’s releases, UK’s building society Nationwide, in its latest survey, reported that house price growth edged up in December from last month, surpassing market expectations. However, the report indicated that house prices in the UK will increase at a slower rate in 2017 amid ongoing uncertainty over economic conditions and price growth will depend upon further developments in the nation’s economy. Meanwhile, it restated that house prices will probably rise by around 2% in 2017.
Moving ahead, investor will focus on the US goods trade balance data for November and number of people applying for jobless benefits, both due to release in a few hours.
Pound Sterling – UK Markets
Earlier in the session, the Pound managed to recover some of its lost ground against the US Dollar. GBPUSD is currently trading above the 1.2250 handle amid thin trading volumes and as lower US Dollar against the major currencies has lend a hand to the much needed pullback in the Pound. On the macro front, data indicated that UK’s seasonally adjusted Nationwide house prices advanced more than expected in December, boosting optimism over the health of the nation’s housing sector. Optimism among large British companies hit an 18-month high at the end of 2016, bolstered by the nation’s robust economic growth and recovering fully from a slump that followed the Brexit vote and as worries about the global economy receded.
Amid no economic releases in the UK ahead in the week, investors will look forward to global macroeconomic events for further direction in the Pound.
US Dollar – US Markets
The US Dollar traded higher against its major peers yesterday. Data indicated that pending home sales in the US surprisingly dropped to its lowest level in 10 months in November, a sign of weakening momentum for the nation’s housing sector headed into 2017.
The greenback is trading lower against the Pound and the Euro this morning, as traders remain on the sidelines amid lack of fundamental triggers and limited trading activity. In the meantime, investors seemed to have moved past yesterday’s US economic data and now look forward to advance goods trade balance and wholesale inventories along with weekly initial jobless claims data, which could add to gains in the US Dollar against the major currencies in the session ahead. The number of Americans applying for fresh unemployment benefits in the previous week is expected to decline, suggesting continued strength in the nation’s labour market. Additionally, the goods trade deficit is anticipated to narrow in November.
Euro – European Markets
The common currency is trading higher against the greenback and the Pound this morning, however gains will be limited as trading is expected to remain subdued for the remainder of the week, with little economic data scheduled in the Euro zone. As for today, market participants witnessed the release of private loans and money supply data in the Euro zone. Data which came out a little while ago showed that Euro zone’s private loan advanced in-line with market expectations in November, while money supply rose more than expected in the same month. The economic data, however, had limited influence on trading in the single currency against its key peers. Yesterday, the Euro declined against most of the major currencies, amid concerns surrounding the capitalisation of Italian banks.
Going forward, the Euro is likely to remain under pressure against the greenback, primarily due to the heightened prospects of further tightening of the US monetary policy.
Other Currencies – Highlights
The Aussie Dollar is currently trading on a firmer footing against the greenback, amid light trading volumes heading towards the second last session of 2016, while traders remain cautious of negative global headwinds that will likely continue in the year ahead. Market participants will keep a close eye on Australia’s private sector credit data for November. The nation’s private sector credit is expected to grow in-line with market estimates for November. However, if business lending slows, it could make the Reserve Bank of Australia (RBA) concerned that has been wanting to see non-mining business investment to pick up to limit the nation’s dependency on mining sector. Separately, if the Australian economy goes through a longer period of below-par growth the RBA will be obliged to slash interest rates from their relatively high 1.5%, in an attempt to boost demand.
In the session ahead, the US economic releases will be in focus to gauge the direction in the currency pair.