Archive - June, 2015

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The latest figures from the British Banking Association show that mortgage approvals reached a 24 month high in May. In the run up to the General Election April, the risk of an unknown coalition and a mansion tax slowed housing demand. Post-election, with a Conservative majority and interest rates still at 0.50%, buyers are back in force. May mortgage approvals edged up to 42,530 from 42,020 in April, the highest outturn since March 2014. The latest data supports the view of a reaccele…

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The Bank of England minutes for the MPC meeting ending on the 3June recorded that the committee voted unanimously (9 – 0) to leave interest rates unchanged at 0.50% and asset purchases (QE) at £375bn. Lower inflation is likely to dissipate, which is in line with previous comments from Mark Carney comments that the slowdown in inflation was transitory due to the sudden fall in energy prices. Any change from the MPC member voting from 9-0 would be seen as a signal that monetary pol…

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In April the ONS reading for CPI was that UK prices had gone down (deflation). In the height of the recession inflation peaked at over 5%, significantly above the Bank of England’s 2% target. The governor at the time, Mervyn King would write a letter to the Chancellor explaining why inflation was overshooting the central banks remit. With inflation high and asset prices appreciating, some analysts believed that interest rates would need to be increased from the record low of 0.50%. The…

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Overnight the Bank of Japan Governor Kurodo said that “the Yen may not weaken much further on real effective exchange rate basis”. The comments led to an immediate strengthening in Yen crosses, as traders interpreted the comments; that the BoJ will not be easing further in the near future. USDJPY session high was 124.65, following Kurodo’s comments the currency pair to session lows of 1.2245. The governors comments were retracted by a Japanese official, in what has be…

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The US Dollar has been bid since the release of Fridays employment report from the US. The Non-Farm Payrolls headline figure of +280,000 jobs in May, with the unemployment rate ticking slightly higher to 5.5%. There was a gradual increase in average hourly earnings, up by 8 cent to $24.96, which should eventually put further pressures on uptick in prices. This adds to the argument, that Janet Yellen should begin the gradual tightening of policy before the year end. This is in contrast…

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Traders are awaiting the US employment figures for May at 13:30pm London. The median expectation is for the headline Non-Farm Payrolls to be +225,000 jobs (+223,000 in April), and for unemployment rate to remain unchanged at 5.4%. The Fed has signalled wage growth and the tightening labour market to be the signal to tighten monetary policy. The market consensus is for a rate hike in September 2015, however Christine Lagarde (IMF) urged the Fed to hold off until 2016 before beginning to tight…

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The Markit / CIPS UK Services PMI missed analysts’ expectations; the reading was 56.5 in May compared with a strong figure of 59.6 in April. The release for May was the ninth consecutive month above 50.0, signifying expansion. The Services PMI figure followed Tuesday’s Manufacturing PMI release that also missed the analyst consensus. The Markit release highlighted that the outcome of the UK election had reduced business uncertainty. A key point that the market seems to have…

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In the FX markets Sterling (GBP) weakened against the other major currencies as the Markit / CIPS UK Manufacturing PMI missed expectations. The release from Markit showed manufacturing output had expanded in May, with the index at 52.0 compared to the revised April figure of 51.8. Manufacturing is only a small component of the overall UK GDP, with services being the major contributor to the economy. Following the release Sterling was offered against the US Dollar, trading to down below…

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