UK mortgage approvals data again beat consensus forecasts by a substantial margin with an increase of over 91,000 for October from a revised 85,500 the previous month and the highest reading since September 2007.
Overall confidence in the UK economy deteriorated, especially with increased pressure for a national lockdown for England. The latest Lloyds business confidence barometer also weakened in the latest month, reinforcing expectations that the UK economy would stall. Weaker risk appetite also hampered Sterling with a fresh retreat to 1.2900 against the Dollar and to 1.1040 against the Euro. Month end positioning alongside a weekend of continued trade talks could also likely trigger further volatility.
Ursula von der Leyen, President of the EU Commission did however confirm good progress had been made in the Brexit trade negotiations. Sterling however, on the back of those comments was still quite hesitant in rallying higher.
According to the advance reading, US GDP increased at an annualised rate of 33.1% for the third quarter and above consensus forecasts of 31.0%. This was the strongest quarterly expansion on record following the record contraction of 31.4% the previous quarter. Consumer spending increased at a rate of 40.7% following the contraction of 33.2% previously. Initial jobless claims declined to 751,000 in the latest week from a revised 791,000 previously and slightly below consensus forecasts. Continuing claims also declined to 7.76mn from 8.47mn, although there were further concerns that claims were falling due to benefits running out.
The Dollar paused its climb at the start of Fridays trading session against the Euro, as the single currency fell to weekly lows against the greenback after the European Central Bank signalled further monetary easing by the end of the year. Still, uncertainty surrounding Tuesday’s US presidential election and coronavirus fears will continue to drive the direction of the US currency and loom over the market for the time being.
German labour-market data was stronger than expected with a decline in unemployment for October. German consumer prices also increased 0.1% for October with the year-on-year rate unchanged at -0.2%.
The ECB made no policy changes yesterday at its latest meeting with the rate being held at 0.0%. The following statement did however, make unusual specific references to downside the risks for the economy. In context, there was a promise to look at all incoming data, including the exchange rate, and recalibrate policy at its next meeting in December.
President Lagarde reiterated that risks were on the downside and that the recovery had lost momentum faster than expected with a very difficult period expected in November. She made the point very clearly with comments that there was little doubt that the ECB will act in December. The dovish rhetoric and promise of action in December put downward pressure on the Euro with the single currency retreating to monthly lows against the US Dollar.
As of writing, the Euro is currently trading just under the 1.1680 against its US counterpart.
Data to watch
10:00 - EUR - German Prelim
13:30 - USD - Core PCE Price Index
13:30 - USD - Personal Spending
14:45 - USD - Chicago PMI
15:00 - USD - Revised UoM Consumer Sentiment
Posted in Daily Market News on Oct 30 2020