Global Foreign Exchange Market News Update
GBP/USD currently trading at about 1.5370, GBP/EUR is towards 1.1650 so far this morning. So the Sterling is higher both against the Euro and the United States dollar, compared to where it was this time yesterday. I'll love to say that it was as a result of the royal birth, but I think that would be slightly overly generous. Certainly, the United States dollar weakness that we saw on Monday was as a result of the weakness seen in the U.S. new homes sales. We saw as for existing homes sales, it came out 1.2% lower compared to the 1.5% expansion that the market was looking for. Gold trading is headed higher as well.
Now, this was the first homes sales figures that we've seen since yields on U.S. treasury debts and therefore mortgage debts in the United States started to rise as a result of the US Fed tapering charter. So if you put that all together, then you'll have to say that there's a direct correlation between the increase in mortgage rates and the falloff in new home sales. The recovery in the housing markets is still at the behest of what's going with the Federal Reserve, with the tapering argument. If it gets too much and home sales continue to fall off, then we may see some delay in tapering argument as the Federal Reserve.
In the main time, a new survey published by Bloomberg says that 87% of economist are looking for some form of tapering by the Federal Reserve by the end of the year, around 50% are looking for it by September and the rest looking for it at the December meeting.
That being said, the US dollar is very much on the back foot - the GBP/USD stirs towards the 1.5400 and the EUR/USD up towards the 1.3200. Monday was a fairly quiet session and the market is looking for the next real catalyst for movement and it's probably going to come towards the end of the week - European PMI's, UK growth figures, etc. In the main time, it is likely to be a quiet day today, which is still governed by things that happened overnight in China and Japan. Japan increased its economic outlook, saying that the recovery may now be self-sustainable, which obviously good news, considering all the stimulus that they are putting into their economies and also the deflationary picture within the Japanese economy is starting to weaken. This also driving crude oil up today across the board.
Two Chinese politicians (The Premier and the Deputy President) are coming out to talk about continuous stimulus for the Chinese economy, no letting growth below the 7% mark - that's going to raise a very delineating line in the sand for the Chinese economy going forward. So that's helping things move a little bit forward, but still very quiet over the course of the past 24-48hrs.
Data wise today, we expect the UK mortgage applications at 09:30 and this should be strong. The help to buy scheme is getting a lot of praises at the moment, giving the increase in house prices we've seen as a result. Whether that's going to lead to a bubble or not, we'll have to wait and see.