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Pound boosted by positive UK housing data

Published: Thursday 18 January 2018

  • Bank of Canada raises base rate
  • Chinese economic growth accelerates
  • US Federal Reserve reports good growth
By  David Johnson

Pound stronger off the back of house prices rising
The Pound rose against the Euro and US Dollar yesterday and maintained those gains overnight after the Royal Institution of Chartered Surveyors (RICS) reported positive sentiment in the UK housing market. A change in their index from 0 to +8 shows a larger proportion of those surveyed who see house prices rising even though the recent Stamp duty cut for 1st time buyers doesn’t seem to have lured many more people into the market. I suspect the huge deposit required to get a mortgage might be a factor.  Sterling traders will now await tomorrow’s release of the December retail sales numbers. If company results are anything to go by, the high streets and malls suffered but online sales may have picked up the slack. There is also likely to be a shift from December business to November with the rise of the irritating Black Friday phenomenon. So month on month data is likely to look awful but the annual growth rate should be healthy. GBP traders will have to pick the bones out of that melee.
Bank of Canada raises base rate
The Bank of Canada raised its base rate yesterday. That was largely expected and the Canadian Dollar was largely unruffled by the news. The GBPCAD exchange rate continued in its slightly upward trajectory. The Canadian Dollar does tend to track the USD and we are seeing a similar level of aggressive sell-off in the CAD as we are in the USD but the GBPCAD rate hit a long term trend line yesterday and stepped down again. Whether it will have another try at breaking higher is an open debate and may hinge on the UK retail data tomorrow.
More jobs created in Australia
Australia added far more jobs than forecast last month. 34,700 jobs were created, which was miles above the 10-15k forecast. That’s very positive but the higher number of people eligible to work meant the unemployment rate edged up from 5.4% to 5.5%. So in spite of the job gains, the Australian Dollar stayed around A$1.73 to the Pound at the interbank level. Traders will want to see the wage price inflation data next month to see if upward pressure will force the Reserve Bank of Australia (RBA) to raise interest rates.
And Asian and Australasian currencies will have gained a lift from very impressive Chinese Gross Domestic Product (GDP) data released overnight. You can question the validity of their data (and many do) but China is reporting 6.9% annualised growth in their economy. If it’s true, that is a boost for countries that export to China and also yet another concern for the US authorities who are very wary of the growing power of China in the global economy. Sanctions may be forthcoming.
US Federal Reserve publishes Beige Book
And speaking of the US, the Federal Reserve’s Beige Book was published last night. It may not sound inspiring but it does form a component of the agenda for the Fed’s next meeting, so it has a definite level of significance. The words ‘modest’ and ‘moderate’ are massively overused in these documents as each regional Federal Reserve adds its activity assessment but Dallas reported a "robust increase." Ooooh get them; being all daring and positive. It does add some weight to the calls for US interest rate hikes but the US Dollar is still being sold as commodities improve and as global growth lures US investment funds away from the safety of the US treasuries.
Data for the rest of today is pretty thin on the ground (sorry if that offends the snow-bound amongst you) but, other than a bit of US housing data and some European Central Bank (ECB) speakers, there isn’t a lot to look forward to.

Born Free...
And in a small scale ‘Free Willy’ moment, an Italian chef was preparing to bake a four pound Grouper which had been caught locally that day, when he noticed the poor thing was still breathing. Considering it a miracle, Riccardo Braghieri took the fish back to the sea and it is now swimming around merrily off the coast of Camogli. He filmed it breathing first of course, and posted it on the internet, because you can’t publicise your restaurant with just a memory, can you. The video is on the Mail Online website if you need to see.
The difference between involvement and commitment

The difference between involvement and commitment is like bacon and eggs. The chicken is involved; the pig is committed.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
CAD 13:30 Canada: ADP Non-Farm Employment Change 59.2k 59.2k
USD 13:30 US: Building Permits 1.30m 1.29m
USD 13:30 US: Housing Starts 1.30m  1.28m
USD 13:30 US: Philly Federal Reserve Manufacturing Index 26.2 24.9
USD 13:30 US: Unemployment Claims 261k 250k
USD 14:00 US: Crude Oil Inventories -4.9m -1.4m
NZD 21:30 New Zealand: Business Manufacturing Index 57.7 57.7

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