US Dollar rises as markets await Federal Reserve statement
18/Mar/2015 • Currency Updates•
The Pound edged back down towards its nine year low against the Dollar yesterday, depreciating by 0.45%.
Mortgage lending in the UK dipped unexpectedly according to the Council of Mortgage Lenders yesterday. Just 41,400 home loans were granted in January, down 16% from a year previous and a massive 26% from December. Also at 19,000, the number of loans made to first time buyers hit its lowest level in 21 months. Mortgage approvals, however, have actually risen, pointing to a possible uptick in lending in the coming months. Away from the currency markets, it was announced the national minimum wage in the UK will increase by 20p an hour to £6.70 from October, while the yearly revision of the consumer price index basket of goods was announced. E-cigarettes and online music were added for the first time, with commission on foreign exchange now no longer included in the inflation measure.
A hectic day in the UK will see the release of the Bank of England minutes from the March meeting, including the much anticipated vote on interest rates. It is also worth noting the average earnings and unemployment rate from National Statistics, all at 9:30am. This is followed by the budget speech from George Osborne at 12:30pm.
The Euro continued to claw back ground on the Greenback in the lead up to this evenings Federal Reserve meeting, although fell in afternoon trading to finish 0.2% lower.
As forecast, the Eurozone’s rate of inflation was confirmed by Eurostat at -0.3% in February, remaining marginally up on the multi-year low reached in December. However, encouragingly the core inflation rate, which strips out volatile priced products, was actually revised upwards to 0.7% from an initial 0.6%. Even more promising, and in another sign that the Eurozone recovery is taking hold, the ZEW economic sentiment survey soared to its strongest position in thirteen months in March. The index climbed well above forecasts to 62.4 and although the same measure for Germany came in below expectations at 54.8, this was also the highest reading since February last year. The current situation index for Europe’s largest economy also impressed, increasing more than 10 index points to 55.1.
The ECB’s non-monetary policy meeting at 8am today will be followed by construction output and trade balance data at 10am London time.
A second straight day of mostly mixed data releases across the pond. The US Dollar, however, climbed by 0.2% against its major counterparts.
Bad weather continued to wreak havoc in the US in February, with heavy snowfall in the Northeast and Midwest causing construction on new homes to slump by 17% last month. The monthly housing starts measure declined from a revised 1.08 million to just under 0.9 million after construction in the Northeast plummeted by 56% to its lowest rate since 2009. In contrast, permits for new construction, a sign of future demand, increased by 3% to an annual rate of 1.09 million. Permits for projects of five units or more climbed 20%, reflecting the post-recession trend of renting property rather than buying. Elsewhere, US Treasury secretary Jacob Lew warned lawmakers that Congress was undermining economic performance by failing to approve governance overhauls at the IMF.
Tonight we will see the much anticipated release of the Federal Reserve’s monetary policy statement. The details will, as always, be crucial. A removal of the word “patient”, as is generally expected, would open the door to an interest rate hike and cause the markets to start pricing-in a June increase.
Rest of the world
Another bad day for Brazil’s Real which lost 0.7% against the Dollar following nationwide anti-government demonstrations, while Bank of Japan Governor Kuroda warned inflation could turn negative in the country in the coming months.