Dollar rises as American economic confidence booms

Claire Hogarth27/Aug/2014Currency Updates

GBP

The pound bounced back to finish flat following overnight losses against the euro caused by Monday night’s debate over Scottish Independence. Whilst the ‘Yes’ vote’s Alex Salmond was widely polled to have won the final debate and to have slightly narrowed the gap between the opposing camps amongst those likely to vote, it is still not anticipated that the referendum will lead to a fully independent Scotland. This was reflected by traders buying in the dip yesterday morning off the back of analyst expectations for the euro to be held down by weak Eurozone wide inflation figures on Friday.

The early morning bounce-back was marginally hampered when the BBA released its high street banking data at 9:30. Mortgage Approvals were at 42.8k for July, down 0.5k from June and disappointing against forecasts of 44.2k.

In spite of this the BBA highlighted that the new typical level of around 40k mortgages approved per month is 12% higher than at the same time a year ago. The report also recorded rising investment from savers in high street bank, NISAs that were introduced at the last budget, as well as improving credit growth amongst businesses in the Manufacturing, Wholesale and Retail sectors.

No data of note out today.

EUR

The single currency hit its lowest level in 11 months against the dollar on the back of increasing bets on Draghi to introduce monetary stimulus at the next ECB meeting. With an absence of key economic indicators from the continent, attentions shifted to the Ukrainian crisis as President Poroshenko announced late on Monday night his intention to call a snap election.

By dissolving parliament the President will be hoping to reconsolidate his position as he has openly admitted that he presently holds a weak mandate for policy creation. Pro-Yanukovych MP’s remain profligate within the parliament and whilst Poroshenko’s gesture indicates impressive commitment to democratic principles, the market may be spooked by the unknowns created by yet another election in the increasingly fragmented state.

Yesterday saw French President Hollande shake up his cabinet, removing dissenting party members including Economy Minister, Arnaud Montebourg, who had publicly opposed the government’s austerity measures. The President’s gradual shift towards the economic right has cheered analysts in recent months but has yet to produce a substantive turnaround in the sick man of Europe’s fortunes.

Today we have German import indices and the reading for consumer confidence for next month as well as business and consumption data from France and Italy.

USD

There was increasingly positive outlook from the States as consumer confidence for August was up to 92.4, it’s highest in 7 years, against a forecast of 89. As 70% of the US economy, consumer spending is a bullish indicator of future economic expansion.

The US saw record breaking durable goods orders at 22.6% for the month of July up from 2.7% and against predictions of a figure around 7.5%, in spite of this the dollar market suffered a slight dip due to the excluding transportation figure coming in negative at -0.8% against 3% for May and 0.5% expectation. This reflected massively increased sales in aircraft and cars but the market’s reaction indicates that, similarly to non-farms and exc. Fuel inflation, the selective figure has the capability to affect markets more substantially.

The housing price index was up slightly in June to 0.4 from 0.2, though the release did little to create pivots.

Today we have minor data in the form of figures for mortgage applications and crude oil stocks.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.