Dear Subscriber, Please find below today's update which gives you an insight into the current market conditions, enabling you to keep informed and up to date on the latest currency movements. Headlines Dear Customer, • UK Mortgage Approvals at 3.5-yr high – another bubble?
• Eurozone CPI inflation down to 1.1% – ECB rate cut speculation harms Euro.
• GBP/USD at 9-month high – government shutdown spooks investors.
• GBP hits 3.5-yr high vs. CAD – but Canadian GDP strikes 2-yr high. Sterling Britain's nascent housing market recovery continued yesterday as it was reported that UK Mortgage Approvals reached their highest level since the financial crisis during August. The Bank of England confirmed that lenders approved 62,226 mortgages during August as buyers benefitted from the Central Bank's Help to Buy scheme. Although some politicians and analysts fear that the government's lending schemes could be fuelling another housing bubble, the Pound has thus far remained relatively immune to the speculation, as traders have focussed on the recent uptick in Retail Sales, Manufacturing, Construction and Services instead.
Euro The Pound remained very close to 8-month highs against the Euro yesterday as the single currency was hampered by news that inflation in the currency bloc tumbled to its lowest level since February 2010 during September. With Eurozone Consumer Prices well below the European Central Bank's 2.0% target at 1.1%, it is growing increasingly likely that the ECB could look to spur credit growth through some form of accommodative monetary policy in the next few months. Another rate cut, or another injection of LTRO cheap liquidity, may not be announced this week, but if it is unveiled the likely market reaction will be to short the Euro as bond yields drop. The single currency is also being held back by concerns that Silvio Berlusconi's latest antics could destabilise the political sphere in Italy. However, these fears receded slightly yesterday as it emerged that some members of his PDL party were willing to break ranks and keep Prime Minister Enrico Letta's coalition government afloat. The development led Berlusconi to concede that he may have to approve the 2014 budget before calling for new elections.
US Dollar Sterling appreciated by around 0.2 cents against the US Dollar yesterday, reaching its highest level since January in the process, as fears of a government shutdown in America continued to weigh over investors. With neither the Democrats or the Republicans showing any willingness to budge over the 2014 budget, traders attempted to calculate the potential costs of a long period of Federal cessation. Whilst the actual impact of such a scenario is always difficult to estimate, many market players feel that a tapering of asset purchases in 2013 could be very unlikely now that government data releases such as the Non-farm Payroll report will be delayed due to the government shutdown.
Canadian Dollar The Pound reached a fresh 3.5-year high against the Canadian Dollar yesterday despite the fact that Canadian GDP was reported to have accelerated at its fastest rate since 2011 during July. The positive 0.6% growth score beat the market consensus of 0.5%, but was unable to halt the stampeding Sterling, which is now around 15 cents stronger against the 'Loonie' than it was during March of this year. The uncertainty over the border in the United States also impacted CAD yesterday.
Australian Dollar The Pound to Australian Dollar exchange rate did not register any permanent moves yesterday as an attempted 'Aussie' rally in the morning petered out by the evening. It seems that traders were slightly perturbed by a weaker-than-expected HSBC Manufacturing PMI result of 50.2 in China, which was considerably softer than the market consensus of 51.2. GBP/AUD declined by around -1.25 cents earlier this morning as the Reserve Bank of Australia elected to hold interest rates steady at 2.50%.
New Zealand Dollar With tensions running high in Washington DC, the New Zealand Dollar came into demand against the US Dollar yesterday and these cross-flows helped to send the 'Kiwi' higher against the Pound.
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