UK mortgage approvals fell to a record low of 9,300 in May as the reopening of the housing market failed to provide a bounce, and well below consensus forecasts of 25,000. Consumer lending declined another £3.4bn for May following April’s £7.4bn drop and Bank of England data recorded a borrowing surge by small businesses desperate to survive given that substantial parts of the economy remained under lockdown. As the latest round of Brexit talks got underway the EU Commission stated the party line of “make progress and secure a deal” but the lack of expectations of a quick result meant market confidence remained fragile.The Pound remained under pressure, dipping near to 1.2250 on the Dollar while the Euro strengthened to 3-month highs near 1.0893 before correcting to 1.0940.
Firmer global risk appetite this morning has stabilised the Pound, although sentiment is fragile as the news of local lockdown in Leicester reinforced market unease. Q1 GDP was revised down to -2.2% from -2.0% previously with a sharp widening of the currency account deficit reinforcing a lack of confidence in UK fundamentals. Sterling has held below 1.2300 on the Dollar and 1.0940 on the Euro.
The Dallas Federal Reserve (Fed) manufacturing index recovered to -6.1 from -49.2 previously and above market expectations of -22.0. Regional manufacturing surveys have been strong which suggests there may be a strong reading for the National ISM release on Wednesday. The dollar overall regained ground during the day with some indications that the US currency would gain support from month-end positioning.
In prepared comments ahead of Tuesday’s congressional testimony, Fed Chair Powell stated that recent data offered some positive signs, but output and employment were far below pre-pandemic levels. The economy had entered a new important phase sooner than expected while the path ahead is uncertain while he continued to back strong stimulus support for the economy.
Euro-zone industrial sentiment recovered to -21.7 for June from -27.5 the previous month, although this was weaker than consensus forecasts. The services-sector index also failed to match market expectations with a recovery to -35.6 from -43.6 previously, denting expectations of a rapid recovery.
The German CPI inflation rate increased to 0.9% from 0.6% and compared with market expectations of 0.6%. The data may ease ECB fears that deflationary pressures will take hold, especially if today’s Euro-zone data is also above consensus forecasts. The central bank will, however, maintain a highly expansionary monetary policy in the short term.
As of writing, the Euro trades just above the 1.12 level against the Dollar.
Data to watch
13:45 - USD - Chicago PMI
14:00 - USD - CB Consumer confidence
16:30 - USD - Fed Chair Powell Testifies
Posted in Daily Market News on Jun 30 2020