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UK Mortgage Approvals Rise Above Estimates: BBA
The number of mortgage approvals increased to 37,305 in February, up from 36,394 a month before and comfortably above expectations, according to the data published on Wednesday by the British Banking Association (BBA).
"House purchase approvals are starting to trend upwards. Though February was 20% lower than last year, early 2015 is seeing higher demand," the BBA report said.
Commenting on the survey, BBA chief economist Richard Woolhouse said "the increase in mortgage approvals is welcome news and a sign that the housing market is beginning to improve. We’re seeing stronger demand for mortgages as consumers take advantage of some of the very competitive deals currently available."
The latest data from the Council of Mortgage Lenders (CML) showed mortgage lending reached £13.4 billion in February, which was down 9% on both the month before and the same month a year ago, and the lowest monthly estimate for gross mortgage lending since April 2013.
The CML survey showed that seasonal factors weighed on activity at the start of the year, "but looking through these, the underlying picture appears to be stabilizing."
The Bank of England (BoE) reported earlier this month the number of loans secured for house purchases in the UK had risen between December and January by 60,786, up from 60,349 in December, but the overall number of approvals was significantly below the post-crisis peak seen in first half of last year (76.9K in January 2014), and well below the pre-crisis levels.
The official house price index, published by the Office for National Statistics (ONS), slowed to 8.4% over the year to January, down from growth of 9.8% a month before. On a monthly basis prices declined 0.2%.
According to commercial surveys, house price growth cooled slightly in the first months of this year. The average UK asking house price rose 1% between February and March, the slowest growth for three years but still close to the June 2014 all-time high, the Rightmove House Price Index survey estimated last week.
The latest Halifax survey showed UK house prices declined 0.3% between January and February but the underlying quarterly figure, which is less volatile than the monthly change, increased 2.6% - the highest since September 2014.
Mortgage provider Nationwide informed earlier in March that the average asking price of properties had declined 0.1% between January and February. On a yearly basis, house price inflation slowed to 5.7% in February from 6.8% a month before, which Nationwide said was the sixth month of price growth moderation.
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GBP/USD: Trading the UK Retail Sales
British Retail Sales is considered one of the most important economic indicators. A reading that is higher than the market forecast is bullish for the British pound.
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Thursday at 9:30 GMT.
Indicator Background
Retail Sales is the primary gauge of consumer spending, a critical component of economic growth. Traders should treat this indicator as a market-mover.
Retail Sales disappointed in January with a decline of 0.3%, short of the estimate of a 0.1% decline. The markets are expecting a sharp turnaround in the February report, with a forecast of a 0.4% gain.
Sentiments and levels
The pound flexed some muscle last week, recovering partially from huge losses since late February. The Fed may have dampened expectations of a rate hike in the next few months, but if US employment data and the GDP release are strong, the dollar could reverse directions this week. So, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.5296, 1.5008, 1.4813, 1.4621 and 1.4521.
5 Scenarios
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GBP/USD: Sterling Lifted Ahead of UK Data
Sterling jumped above $1.49 ahead of the European open as investors anticipate positive February UK sales data.
The pound jumped some 30 pips in the late Asian session, hitting its daily high of $1.4901.
In the UK, February retail sales are in focus. "Unlike the US consumer spending has by and large been fairly positive, helped by the falling oil price, as well as heavy retailer discounting, and despite a 0.3% slide in January retail sales, today’s February numbers are expected to show a rebound of 0.4%," Michael Hewson from CMC Markets wrote on Thursday.
Moreover, the cable remains supported by a broad US dollar sell-off, following sluggish US durable goods data.
The view that the US economy is in good shape has taken a knock in the past few days with a raft of disappointing data announcements. Yesterday’s durable goods numbers for February did nothing to dispel these concerns. A decline of 0.4% for orders excluding transportation added up to the fifth monthly decline in a row, and a total decline of 4.4% for the last five months, as previous months also got revised lower as well.
"This continued disappointment speaks to a wider concern that not only is tomorrow’s final Q4 GDP revision likely to be weak, but Q1 is likely to be even weaker," Hewson added.
Technical Analysis
Sterling is moving in a very tight, well defined trading range between a resistance of $1.5000 and support at $1.4840.
We expected the EUR/USD and AUD/USD volatility to calm down, but this scenario actually happened mostly to GBP/USD.
On a short-term outlook, we are more bullish than bearish and believe that sterling will cross above the $1.5000 level and try to attack a spike high slightly below $1.52.
Supporting our thesis are other major crosses which are showing relative strength compared to sterling, and we think that sooner or later GBP/USD will follow.
On the other hand, if the US dollar becomes favored by investors again, and the US dollar crosses start to go south again, sterling will be first to be sold off, to areas of previous support around $1.47.
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GBP/USD climbs to 1-week highs on upbeat U.K. data
The pound climbed to a one-week high against the U.S. dollar on Thursday, supported by upbeat U.K. retail sales data and as demand for the greenback remained under pressure after Wednesday's disappointing U.S. economic reports.
GBP/USD hit 1.4990 during European morning trade, the pair's highest since March 18; the pair subsequently consolidated at 1.4979, advancing 0.67%.
Cable was likely to find support at 1.4825, Wednesday's low and resistance at 1.5099, the high of March 11.
In a report, the U.K. Office for National Statistics said retail sales increased 0.7% last month, above forecasts for a gain of 0.4%. Retail sales in January rose by 0.1%, whose figure was revised from a previously reported decline of 0.3%.
Year-on-year, retail sales increased at a rate of 5.7% in February, beating expectations for a 4.7% gain, after rising at a rate of 5.9% in January.
Core retail sales, which exclude automobile sales, rose 0.7% last month, compared to forecasts for a 0.4% rise, after falling 0.3% in January.
Meanwhile, the dollar remained under pressure after the U.S. Commerce Department reported on Wednesday that total durable goods orders, which include transportation items, declined 1.4% last month, compared to expectations for a gain of 0.4%.
Core durable goods orders, excluding volatile transportation items, inched down 0.4% in February, disappointing forecasts for a 0.3% gain.
The greenback has been weakening since the Federal Reserve indicated last week that it may raise interest rates more gradually than markets had expected.
Sterling was steady against the euro, with EUR/GBP at 0.7370.
Later in the day, the U.S. was to release the weekly report on jobless claims.
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GBP/USD: Pound Lifted After Carney's Rate Hike Comment
The pound gained during the European session on Friday, after the Bank of England (BoE) Governor Mark Carney said at the Bundesbank conference that the next move from the central bank is likely to be an interest rate increase.
The cable climbed 0.24% to $1.4879, after it had fallen to $1.4796 earlier, due to general support the US dollar is receiving before the nation's final fourth-quarter GDP reading.
Earlier in the day, BoE Deputy Governor Ben Broadbent said that the Bank of England will be watching closely for signs that 'good' deflation is turning into 'bad', but at the same time policymakers should not "over-react" to low inflation at the moment. The Bank of England is expected to hike rates this year, and investors are closely watching any comments from the central bank and of course, the macroeconomic situation in the country.
In US, the final reading of the fourth quarter GDP is expected to rise to a 2.4% annual rate, from 2.2% previously, while personal consumption is expected to have risen at a 4.4% annual rate, up from the earlier 4.2%.
The University of Michigan consumer confidence is expected to increase to 92.0 points in March, from 91.2 in the month before.
Moreover, Janet Yellen will hold a speech in San Francisco, where she might comment on the latest FOMC outcome, which had negatively surprised.
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GBP/USD forecast for the week of March 30, 2015
The GBP/USD pair went back and forth during the course of the week, testing the 1.48 level on the bottom, and the 1.50 level on the top. We believe that this market will eventually break down though, so a move below the 1.48 level is the signal that we need to see in order to start selling yet again. At that point in time, we feel that the market will then go down to the 1.45 handle, and then perhaps the 1.40 level. We have no interest in buying at all.
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Even before any 'Brexit' vote, UK losing sway in Europe
After decades of punching above its weight in Europe, Britain's influence in the European Union is waning, even before we know whether a promised referendum on "Brexit" will go ahead.
London's partners are keen to keep Britain in the 28-nation bloc, but not at any price.
They value its open economy, international outlook, military prowess, democratic culture and able civil servants, even though it remains semi-detached outside the euro currency, the Schengen open border area and much police and judicial cooperation, and with a permanent rebate on its EU budget contribution.
But there is growing frustration in Brussels, Berlin and Paris at the lack of clarity over Prime Minister David Cameron's goals if he is re-elected on May 7 and seeks to renegotiate Britain's EU membership and put the result to a vote in 2017.
"The real danger is that they raise demands that cannot be achieved with their partners," said a person familiar with German Chancellor Angela Merkel's thinking.
A belief in Cameron's entourage that Merkel will do whatever it takes to keep Britain on board, to balance out a more statist France, may be a misjudgment. He has twice ended up isolated by making that assumption - when he tried to veto an EU fiscal pact in 2011, and when he sought to block Jean-Claude Juncker as European Commission president last year.
Long-time British allies such as Poland and other eastern Europeans have been alienated by Cameron's anti-migration rhetoric. Others are loath to ally themselves in EU bargaining to a country that may not be there to repay a favor.
Cameron himself, under pressure from the anti-EU UK Independence Party and Eurosceptics in his own Conservative party, has been deliberately vague about what changes he seeks.
In a campaign television interview last week, he said: "The problem with the European Union at the moment, it has got some good aspects but too many things that drive people mad.
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GBP/USD: Sterling Trades in Red, $1.48 in Sight
he greenback was trading higher against the pound on Monday as traders re-entered new long dollar positions, with the greenback still the preferred currency. At the London open, cable was seen at $1.4815, down around 0.35% on the day, but the decline during the European pre-market looks very illiquid and might be erased during normal trading hours.
Earlier on Friday, Janet Yellen, the leader of the US central bank, said that unless there's another wave of price drops, the Federal Reserve (Fed) should abandon its near-zero rate policy sometime this year.
"We expect US economic data to take a more positive turn in the week ahead. On Monday, the consumer takes center stage and after a recent soft patch our economists expect strength in confidence surveys to translate into a 0.3% m/m increase in personal spending in February. As for Friday’s nonfarm payrolls report, we see another impressive gain of 260K. Post-FOMC Fed speakers – including chair Yellen this past Friday – have generally reminded the market that a mid-year rate lift-off remains likely," analysts at BNP Paribas believe.
The US economic outlook remains stable, although deteriorating slightly recently, but this should not deter the Fed from hiking rates. The inflation outlook is not so bright, considering WTI oil is below $50 and the dollar's strength, but the US economy should be strong enough to sustain a strong dollar.
However, there seems to be a lack of short-term bullish momentum for the dollar on currency markets and traders are waiting for new impetus to move. Such an impulse might come on Friday when non-farm payrolls figures will be released, with expectations of a 250,000 print again, confirming the very solid condition of the US labor market.
"The inability of the economy to sustain a 3%-plus growth rate in the first quarter is due to several transitory factors, which we expect to dissipate in Q2. Consequently, similar to last year, we expect economic activity to rebound over the next couple of quarters. To the extent that monetary policymakers are projecting less tightening than before, recent dollar appreciation, which has been on a torrid path, is likely to moderate," Joseph A. LaVorgna, chief US Economist at Deutsche Bank wrote in a research note on Friday.
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GBP/USD: Pound Short Squeezed Toward $1.49 Level
The UK pound corrected some 100 pips against the US dollar during the US session on Tuesday as technical traders saw an opportunity to buy the pair after it crossed a psychological barrier at $1.48.
The pound gained 0.34% to $1.4859 on Tuesday, jumping around 100 pips from the $1.4760 area beforehand.
The pair is still in limbo, initially being dragged down by a somewhat hawkish speech from Federal Reserve (Fed) chief Janet Yellen last Friday, which woke up greenback bulls across markets and continues to have an impact. The Fed Chair said that unless there's another wave of price drops, Fed should ditch its low rate monetary policy sometime this year.
As for the latest macro data, US consumer confidence rose to 101.3 in March, following the 96.4 snatched in February.
The Chicago PMI missed estimates in March and hiked to 46.3 points, short of the market's consensus of 52.4 points.
Earlier in the day, the final reading of the fourth-quarter UK GDP confirmed the economy expanded more than in the previous readings.
The third estimate of GDP growth in the fourth quarter of 2014 posted a figure of 0.6% quarter-on-quarter and 3.0% year-on-year, beating estimates of a 0.5% and 2.7% rise, respectively.
In a separate release, the UK's current account deficit narrowed to £25.3 billion in the fourth quarter, down from a revised deficit of £27.7 billion in the third quarter, but above estimates. The main positive driver was a narrowing of the trade deficit.
Technical analysis
Sterling changed direction from range trading to a very mild form of a downtrend with swings of lower highs and lower lows.
The cross will very likely move lower as a major resistance lies at $1.47 and then the spot will be crucial.
Daily charts are way too oversold and even though the downtrend is in place and very strong, we want to see a longer lasting correction before another sell-off and initiating a short selling recommendation.
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- GBP/USD: Sterling Accelerates Ahead of UK PMI
The cable currency pair added to overnight gains ahead of the European open on Wednesday, rising to a fresh session high of $1.4870, up 0.38%, as markets expect the UK manufacturing sector to have recovered in March.
Following the disappointing performance in the previous months, the UK manufacturing PMI is expected to show a reading of 54.5 in March. Due to weaker exports the sector slowed towards the end of 2014 and had a lackluster start to 2015.
"The latest March PMI numbers are expected over the next few days and will give clues important clues as to how well the UK economy has done in Q1 of this year. Starting today with the latest manufacturing PMI numbers for March, which is expected to round off a fairly positive quarter for this sector, with an improvement to 54.5 expected from 54.1, and an average reading over the quarter of 53.9," Michael Hewson from CMC Markets UK wrote on Wednesday.
Moreover, traders will also focus on the US data front. US ISM manufacturing is expected to grow at a slightly slower pace, while the ADP private payrolls is expected to see 225,000 jobs created. However, the week's main event will come on Friday when non-farm payrolls will be released, with expectations pointing to 245,000 new jobs being added to the economy.
"This could lead to a slight tweaking in expectations for Friday’s payrolls report, while Federal Reserve Presidents John Williams and Dennis Lockhart are due to speak and recall both are calling for rates to go up this year. With the Fed funds future currently only pricing in 40 basis points of tightening by December, which is a post March FOMC low and now 22 basis points below the median, the risks are for a stronger USD, with pullbacks in the USD offering good buying opportunities in my opinion," Chris Weston from IG wrote on Wednesday.
Technical analysis
The first signs of an intraday trend change from sideways to down was only short lived and sterling returned back to its previous trading range above the crucial support of $1.48.
On the first sight it looks like sterling does not respect any areas and the movement is random, but the level at the big round number and psychological barrier at $1.5000 is working as a guide. As long as prices remain below it we can still see that bears are in control and ahead of the bulls