The Bank of England (William Barton / Shutterstock.com)
It was a mildly frantic end to the month for sterling against the euro, with the markets eyeing Thursday’s key interest rate decision from the Bank of England. The day ended with sterling slightly higher against the euro but down on the US dollar.
On the data front it was a big day for Europe, with a mass of data landing (see the euro section), including inflation and GDP, which essentially was supportive of the ECB’s recent monetary policy decisions as growth rose even as inflation fell (although core inflation remains a concern).
It will be a little quieter today, but we will shortly hear eurozone unemployment and see if all that inflation reduction has come at a cost of jobs, or whether, as appears to be the case in the USA, the ECB can engineer a soft landing, or so-called “immaculate disinflation”, where inflation is brought under control without damaging the labour or housing markets.
For the UK, the British appetite for credit continues undiminished, with mortgage approvals and consumer credit growing at their fastest pace for five years. Net mortgage approvals rose to 54,700 in June, against an expectation of just 49,000.
There are fresh hope for inflation, with a slowdown for food prices and discountng by clothes retailers in July, leading to shop price inflation dropping from 8.4% to 7.6%.
In UK politics, PM Rishi Sunak has defended a decision to grant more than 100 new North Sea oil and gas extraction licences as he continues to open up policy differences with the Labour party.
The UK’s financial regulator the FCA has warned banks that if they fail to pass on higher interest rates to savers they will face “robust action”. On average, the biggest savings providers passed on just 28% of base rate rises to their easy access accounts since the start of 2022, said the FCA, but they “will be required to justify by the end of August how those rates offer fair value” or face action.
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GBP: Mortgage approvals surprise market
Sterling ended the day largely unchanged, despite an interesting afternoon where competing data sent it one way then another against the euro. This morning so far has been positive for GBP/EUR.
From the UK the most interesting data yesterday was the shock result for mortgage approvals, which shot up from 51,000 in May to nearly 55,000 in June, while consumer credit increased at its fastest rate since 2018.
How much as all that credit affected the housing market? We have just heard that house prices fell again in July, by 0.2%, taking the annual decline in property values to 3.8%, according to the Nationwide Building Society.
GBP/USD past year
EUR: Growth up, inflation down
Despite a generally positive set of data from the eurozone, the single currency lost to most major rivals yesterday, including by over 1% against the Australian dollar.
The data came thick and fast yesterday, starting with German retail sales (declining sharply last month), then Italy’s quarterly GDP (down 0.3%, way below expectations) and inflation (slightly down, to 6%), eurozone quarterly GDP (up by 0.3%) and inflation, falling to 5.3% across the 20 countries of the bloc.
We will shortly hear eurozone and German unemployment data and get a gauge of the impact of the ECB’s cooling of the economy.
USD: Markets look to jobs data
It was a mixed day for the greenback yesterday with modest growth against the pound and euro but hefty losses against yesterday’s big winner the Australian dollar.
While there was no data to write home about yesterday, today we’ll have JOLTs Job Openings, as well as ISM Manufacturing PMI.
The Labour market will be the largest focus this week, with non-farm payrolls on Friday confirming whether the Fed’s economic management is heading towards a soft landing.
Yesterday the Dow Jones Industrial Average resumed its upward climb, having achieved its best run since 1987, 13 days of consecutive gains.