British Pound Gains versus Euro, Dollar as Housing Data Beat Estimates
- UK mortgage approvals rise more-than-expected to a seven-month high in October.
- GBP/USD jumps to a high of 1.2479 in early European trading.
- Sterling also gains on the Euro, which is still under pressure ahead of Italy’s referendum.
The British Pound is gaining on the Dollar, Euro and Yen after UK mortgage approvals rose more-than-expected to a seven-month high in October, according to official data Tuesday.Mortgage approvals for UK purchases rose for a second straight month to 67,518 in October from 63,594 in September and an 18-month low of 61,381 in August, according to a Bank of England report. Analysts had expected approvals to rise by 65,000 last month.
The data back up last week’s figures from the British Bankers’ Association, which showed a pickup in mortgage approvals and a strong rise in the annual growth rate of consumer credit. The Royal Institution of Chartered Surveyors also reported last week that house-buyer enquiries rose modestly for a second month in a row in October after falling for six months running through to August.
The data are not important enough to influence Bank of England thinking on monetary policy. But despite mortgage approvals remaining below the peak levels seen at the start of 2016 and still being down 3.3% year-on-year, they are more important evidence that British consumers are playing a leading role in keeping the economy growing following June’s Brexit vote.That said, UK consumer and business confidence is set to take a hit in the coming months as uncertainty intensifies as the UK’s formal Brexit process gets under way.
Chart 1: GBP/USD 1-minute Chart (November 29, 2016 Intraday)
GBP/USD rose to a high of 1.2479 in early morning trading in Europe as the Dollar’s upside momentum looks to be receding. EUR/GBP also dipped in early trading to a low of 0.8492 as the single currency continues to trade with a bearish bias. Despite European Central Bank President Mario Draghi’s warning yesterday that the UK will “first and foremost” feel the pain of Brexit, more people are worried about the Euro-Zone.
Sunday’s Italian vote on constitutional reform has become a proxy for Italy’s future in the 28-nation bloc. The referendum is also exposing further cracks in Europe’s fragile banking sector. Indeed, banking stocks are getting hammered across European exchanges.
--- Written by Oliver Morrison, Analyst
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