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Thanksgiving for Pound gains

Thanksgiving for Pound gains

Sterling gained support yesterday as expectations of better (short-term) economic performance offset the caution surrounding the longer-term outlook. BBA mortgage approvals data printed just above consensus with an increase to 40,900 for October from an upwardly-revised 38,700 the previous month. This is the strongest figure for four months, continuing to suggest underlying resilience in the housing sector.

Consumer credit demand was also very strong. There were no major changes in oil prices during the day which held the Pound between 1.2400 and 1.2500 against the Dollar and between 1.1760 and 1.1813 against the Euro. Sterling advanced to a nine-week high on a trade-weighted basis.

The final German Q3 GDP data printed at 0.2%, matching the provisional reading. The IFO index was unchanged at 110.4 for November, maintaining last month’s 20-month high. An improvement in the current conditions reading was offset by a modest dip in expectations. The construction sector produced the highest reading of the year, maintaining expectations of strong domestic demand. Consumer confidence also edged higher to 9.8.

The IFO data helped pull the Euro off its worst levels with a rally back above 1.0550 against the Dollar, although underlying sentiment remained weak. The European Central Bank (ECB) was pessimistic surrounding financial stability risks with concerns that global and European political shifts could revive worries surrounding the Eurozone’s weaker economies.

There were no US developments given the Thanksgiving holiday and narrow ranges prevailed with the Euro unable to secure sustained buying support. There will be the risk of erratic trading conditions on today given a lack of liquidity, with scope for significant position adjustment into the weekend.

Data to watch: 9.30am UK Flash Q3 GDP, year on year & month on month. UK Total Business Investment. 2.45pm US Markit PMI Composite & Services (Nov).

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