We will not budge
UK mortgage approvals in April plummeted to just 15,900 as the housing market was effectively closed, down from 56,1000 in March, and the worst data since records began in 1997. Consumer lending figures showed a net repayment of £6.9bn in April as consumers repaid loans and also built-up cash balances.
Sterling surged higher at market open, peaking just above 1.2550 against the Dollar while the Euro dipped to lows below 1.1540. Sterling was largely supported by expectations for a recovery in the global economy and back in Blighty there were expectations that the Chancellor would introduce a fiscal stimulus bill next month and also introduce trade credit insurance for UK companies.
On the UK/EU trade talks there was further speculation of UK concessions in, not just on fishing but the reports were denied by the UK government. Nissan stated that their UK manufacturing plant will be unsustainable if there is no trade deal with the EU. Sterling settled around 1.2550 at the New York close and extended gains to near 1.2600 by this morning on a dollar retreat. The Euro opens near to 1.1235.
The New York business conditions index strengthened to 19.5 for May from 4.3 the previous month, but this was still substantially below levels that prevailed before the coronavirus crisis. Overall risk appetite remained firm amid expectations of a rebound in the US economy.
The US dollar maintained a generally weak tone during Tuesday with commodity currencies posting further gains while domestic US fundamentals also remained weaker. As far as US data is concerned, the focus will switch to labour markets on Wednesday with the latest ADP jobs data and labour-markets data will also be important over the remainder of this week with the employment report on Friday.
The dollar remained on the defensive on Wednesday with the Euro strengthening to 11-week highs just above the 1.1200 as the dollar index continued to decline to the lowest level since mid-March while overall US confidence continued to weaken.
After a hesitant start at the Euro sharply moved higher with the common currency strengthening to just below the 1.12 level against the Dollar. Taking into account a brief correction, the Euro strengthened to 10-week highs as Europe continued to ease lockdown measures.
Ahead of Thursday’s ECB policy meeting, an element of slight caution weighs on the central bank with the expected introduction of a further round of bond purchases. Rhetoric from ECB President Christine Lagarde will also be important for Euro sentiment.
As of writing, the Euro trades around the 1.1215 mark against its US counterpart.
Data to watch
08:30 – GBP – Final Services PMI
12:15 – USD – ADP Non-Farm Employment Change
14:00 – USD – ISM Non-Manufacturing PMI
G7 Meeting all Day