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September 2017

Sterling holds up as mortgage approvals improve

Published: Wednesday 27 September 2017

  • USD strengthens on North Korea’s threat ahead of Yellen speech
  • Sterling holds up as mortgage approvals improve
  • New Zealand rate decision – no change expected
By David Johnson

North Korea’s threats have heightened tensions across the globe and caused the old staples of Gold and US treasuries to rise. US treasuries also rose after a report showed solid rises in home prices across America’s metropolitan areas. Ironically, considering the US is the alleged target of North Korea’s angst, the US Dollar has also strengthened on that news. The GBP-USD rate has pushed down below $1.34, after peaking at $1.3650 and could tumble all the way to $1.32 without breaking the yearlong upward trend. The Euro – US Dollar rate peaked just below $1.21 and is already down to $1.1750 ahead of Federal Reserve Chair, Janet Yellen’s speech later in the day. We will get the US Durable Goods Orders data as well. So there is scope for further volatility later in the day. If the Pound does get pushed below $1.32, the trendline support is in the $1.2950 area right now. Beware USD buyers.
On the UK side of that equation, we await the Confederation of British Industry (CBI) distributive trades survey, which is an insight into the state of the retail sector. Sterling gained yesterday against the Euro as UK mortgage approvals rose and the Euro faced its own problems. However, there may be a case for habeas corpus against the EU, who seems keen to lock the UK in the EU room until Theresa May agrees to pay to get out. Barnier and Tusk are trying to play the hard men in this situation but, by all accounts, Theresa May is a hard woman…no contest. There is nothing on the UK data front today, so that’ll be the talking point.
The Euro is being held back by the uncertain outcome of the German general election but ought to recover if and when a coalition is arranged. There is a little EU data today, but nothing that would be considered as Tier One, so a day of treading water is likely. 
The New Zealand base rate will be announced very late in the day (GMT-wise). No change is expected from the Reserve Bank of New Zealand (RBNZ) but they have a number of issues to contend with at the moment, so their statement will be influential. The New Zealand Dollar is struggling after a period of strength that hampered exports but kept inflation low. This bout of weakness will have the opposite effects and that may be a good thing for exporters, but it will put pressure on the RBNZ to at least consider higher interest rates. Their current thinking on that will become clear after 20:00 GMT. There is a technical level in the GBP-NZD rate at NZ$1.90, which supported this pair through 2013 and 2014 and is now a resistance level. The market appears to be edging towards that rate, but it will be a tough nut to crack on the way up… if it fails at all. That is worth bearing in mind for both NZD buyers and sellers.
And that is about all there is for today. Have a great Wednesday.
Thought for the day

Do you know why Bruce Willis keeps making the same movie over and over again?

Well, you know what they say about old habits…

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