Major currencies traded within narrow band yesterday, but today is set to be busy

Enrique Díaz-Álvarez26/Feb/2015Currency Updates

GBP

An early morning spike in cable saw Sterling reach a fresh three week high against the Dollar on Wednesday, although this was not sustained and the Pound ended trading unchanged against greenback.

Bank approvals for mortgages in Britain rose for the first time since June last month. Mortgage approvals, as published by the British Bankers’ Association (BBA), climbed to 36,394, 2% up on December’s reading. While encouraging, this still remains 25% down on this time last year. In the same report, growth of personal loans and overdrafts also increased by 3.9% on an annualised basis, the highest rate since late 2008.

Market focus in the UK today will be on the release of growth figures from National Statistics at 9.30am.

EUR

Wednesday proved to be another subdued day for the single currency. The Euro traded within a narrow band to end the London session 0.15% down against the Dollar and 0.1% lower on Sterling.

No major data releases out in the Eurozone yesterday with attention among traders continuing to surround the situation in Greece. Labour Minister Panos Skourletis pledged that the next four months will be a period of daily negotiations, Germany’s Finance Minister questioned the integrity of the Syriza party, while Alexis Tsipras urged MP’s to support the bailout agreement. In the afternoon, President of the ECB Mario Draghi spoke at a hearing before the plenary of the European Parliament, although gave precious new information away and the Euro remained unmoved throughout.

Consumer confidence data out at 10am today will be closely followed by the announcement of the next round of the ECB’s targeted LTRO at 10.15am London time.

USD

Federal Reserve Chair Janet Yellen testified to the House of Representatives for the second day on Wednesday. Reaction in the markets, however, was muted, with the US Dollar index little changed, 0.1% higher.

Speaking in Capitol Hill, Yellen reiterated that Fed policy was dependant on the inflation outlook, although warned price growth would go lower before it improved. Overall, a lack of new information regarding monetary policy ensured the Dollar remained unchanged throughout most of the afternoon.

More data released yesterday pointed to a moderate slowdown in the US housing market. Mortgage applications were down once again in the US, falling by 3.5% last week to mark the third straight week of declines. Sales of new single family homes were also down, although slightly better than forecast, declining by 0.1% to 481,000 in January. Bad weather in northeast US caused sales in the region to drop by the most since June 2012. Janet Yellen suggested recovery in the housing sector had not been as strong as anticipated. A strengthening labour market does, however, provide reason to be cautiously optimistic over the future of the housing industry.

Today bodes to be a busy day’s trading in the US, with a number of key data announcements. Inflation in the world’s largest economy is forecast to follow that of the Eurozone and dip into negative levels for the first time since 2009 when released at 1.30pm. This is followed by durable goods orders, which has generally disappointed lately, and jobless claims.

Rest of the world

The South African government warned higher taxes and a cutback in spending were on the horizon for the country. The tightening of fiscal policy comes amid a series of widespread power outages that could last “more than three years”. The Rand has fallen against the Dollar almost 2% in the last two days. In other news, Brazil’s Real led global currency declines on Wednesday, falling by 1.3% after pressure mounted on the new Finance Minister to deliver spending cuts.

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Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.