Currency Note

UK mortgage rates rise by 6%

By Roseanne Bradley June 20th, 2023

Despite fluctuating around 0.3% yesterday, the pound-to-euro rate remains relatively unchanged from start of play Monday.

Sterling lost 0.25% against the US dollar yesterday, following news that the US housing market index rose another 5 points in June 2023, to 55. This is the highest reading since July 2022 and beat market forecasts of 51. The pound has continued to fall against the US dollar this morning.

Yesterday prime minister, Rishi Sunak ruled out extra help for UK homeowners amid soaring mortgage rates. This comes as figures showed the average two-year fixed-rate loan rose by 6% in June.

Sunak said the government should “stick to the plan” to halve inflation in its attempts to tackle the cost-of-living crisis.

UK inflation figures for May are due early tomorrow morning and economists expect the year-on-year rate to fall from 8.7% to 8.4%.

Later today, economists will receive the latest preliminary figures for US building permits, which are forecast to rise from 1.417m to 1.1425m. Should the data match expectations, it will end the cycle of two consecutive declines.

It was a busy day for Canadian economists yesterday, who had a flurry of data to absorb. Industrial producer prices fell by 1% in May 2023, compared to forecasts of a 0.7% fall. This was the most pronounced decline since August last year and was driven by falling prices for energy and gas products.

The Canadian dollar rose to its strongest rate in nine months against the US dollar as economists digested a hawkish outlook from the Bank of Canada and greenback weakness.

The big data release this week will come on Thursday from the Bank of England (BoE) which is expected to raise UK interest rates by 25 basis points. This would take the rate to 4.75%.

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GBP: British gas prices ease

UK natural gas prices fell to around 80 pence per therm in the second half of June. This comes after the price neared its two-month high of 125.3 pence on June 15. The price is currently 27% higher per therm on the month.

GBP/USD: the past year

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EUR: Up 1.2% against the US dollar

The euro has continued to climb since edging higher this time last week. This morning the euro-to-dollar rate is up close to 1.2% on the week and almost 1% on the month.


USD: Positive homebuilder sentiment

The NAHB/Fargo Housing Market Index in the US rose by 5 points in June 2023, taking the current reading to 55, beating market forecasts of 51. The index brought the reading into positive territory for the first time in 11 months, due to solid demand and supply-chain efficiency.

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