Sterling climbs on the back of upbeat mortgage approval rates
26/Feb/2014 • Currency Updates•
It was a solid day for the pound yesterday, adding 0.4% on the dollar and 0.2% on the euro. Despite an afternoon drop off it still finished up across the board.
On a quiet day of data the catalyst for the upward swings was the seemingly innocuous January mortgage approvals. A bullish reading of 50k, up 2.1k on expectations and 2.9k on December’s reading, was well received by the markets. It is another sign of a booming UK housing market, and was actually the highest level since September 2007, before the crisis. It should be noted that January often sees a boom in home sales as people seek a fresh start to the year.
The widely anticipated GDP figures will be released early this morning, with 2.8% being called. In any event, the reading will likely lead to pivots.
The eurozone’s economy is expected to grow slightly faster than previously thought this year, according to the European Commission’s report yesterday. They predict an extra 0.1% in 2014, taking growth to a dizzying 1.2%. The uptick was due in large part to an improved Spain, which saw its second consecutive positive data release in as many days.
Italy stepped into the commission’s firing line instead, being downgraded to just 0.6% growth for the year. It remains to be seen whether Matteo Renzi’s sweeping reforms will galvanise the struggling economy.
The negatives of the report stopped the headline growth positive having much effect on the markets, with the single currency dropping off against the pound, although it took minor gains from the greenback.
Data out today includes Italian wage inflation, after German consumer confidence released this morning came in slightly to the upside, at 8.5, 0.2 above expectation. The euro gained slightly as a result.
Despite the record bull run by the American equities market, money markets seem to be a little distracted this week. The dollar again was very reactive, bouncing around against the euro and offering little resistance to a dominant pound. It finished down on both pairs, and overnight trading was flat.
The data out of the US yesterday was a mixed bag, with consumer confidence dropping off 1.9 points to 78.1 a disappointing result. House price data came in marginally above expectations for the year, but mom readings contracted for the second consecutive period, giving away signs of a gentle slowdown in the pace of recovery in the US housing market.
Today again is a quiet day for data, with housing sales for January the only highlight.
Elsewhere, the virtual currency bit coin suffered another blow as the MtGox trading platform was closed yesterday on security fears. The online exchange has lost much of its value in recent days, as a series of recent technical issues came to a head. Unfortunately for proponents of the currency, the very nature of the it – being unsecured by any central body – means that it will be a long way before it is adopted by the general public.
The IFC announced yesterday that it plans to issue a 1bn Remninbi bond in London, another step towards the internationalisation of the currency, as well as a step in the right direction for making London the international Remnimbi hub.