GBPUSD news - page 111

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UK Nationwide house price index Nov mm +0.1% vs +0.2% exp


UK Nationwide November house price index report 1 Dec

  • 0.0% prev
  • yy NSA +4.4% vs +4.7% exp vs +4.6% prev
 

UK Construction PMI Advances To 8-Month High, Cost Pressures Continue


The UK November Markit PMI construction index increased slightly to 52.8 from 52.6 the previous month. This was stronger than the consensus forecast of a decline to 52.2 and the strongest headline reading for 8 months.

Business activity and new orders increased at the fastest pace since March and there was a sharp deterioration in supplier performance as supply issues continued.

There was strong activity in the residential house-building sector, although the pace of expansion did moderate, while there was the first expansion in the commercial sector for six months.

Civil engineering maintained a weak tone and underlying uncertainty surrounding the economic outlook was still a key factor weighing on the construction sector.

There was a further increase in costs with the inflation rate at the highest level for over five years with price fluctuations having a negative impact on overall confidence and tending to deter activity.

Employment increased again for the month with a strong increase in sub-contractor usage.

The data will maintain optimism surrounding the near-term outlook, although there will still be concerns that underlying uncertainty will delay key construction projects over the medium term. There are no immediate implications for monetary policy.

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GBP/USD forecast for the week of December 5, 2016


The British pound initially fell during the week but turned around to continue the upward channel that we have been in. The fact that we are broken above the 1.25 level is a good sign, but I believe there is more resistance above at the 1.2850 handle. I think that the market will reach towards there and then find sellers in order to continue to push the markets lower based upon the Federal Reserve interest-rate expectations and of course the exit vote that came out of Great Britain recently.


 

GBP/USD Weekly Forecast: Brexit Stance Hopes Will Continue To Underpin Sterling


Overall, there is scope for some further unwinding of expectations surrounding a ‘hard’ Brexit and also some further unwinding of short Sterling positions. This combination is likely to give Sterling a firm underlying bias, especially with the dollar vulnerable to a correction, although momentum will tend to fade on any approach to the 1.3000 area.

Sterling gained strong support over the week with the highest level against the dollar for close to two months and just before the flash crash with a move above 1.2700. Sterling also strengthened to 12-week highs against the Euro.

The UK currency gained support after comments from Eurogroup head Dijsselbloem that the EU might be able to find a way for the UK to maintain single-market access following an EU exit. There were also comments from UK Brexit minister Davies that the UK could, in theory, continue to make payments into the EU to maintain single market access while the International Trade Minister Hands also hinted late on Friday that the UK could remain in the EU Customs Union.

The Liberal Democrat win in the Richmond by-election will also increase pressure on the government to adopt a softer tone and Sterling continued to gain support from short covering.

The Brexit process will continue to be watched very closely in the short term as the political manoeuvring continues. The remarks both on and off the record from key government ministers will continue to have an important impact on sentiment.

The government is also due to submit its appeal to the Supreme Court following the High Court ruling in November that the government needed to seek parliamentary approval before triggering Article 50 to launch the formal EU exit negotiations. The government is looking to over-turn the ruling and submissions will be important, although the Court is not scheduled to make a ruling until early in 2017.

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UK - BRC Shop Price Index for November: -1.7% y/y (prior -1.7%)


Deflation still in the UK (according to this indicator from the British Retail Consortium)

Reuters report on the release:
  • Rising cost pressures linked to the decision by voters to leave the European Union are likely to feed into high street prices next year, the British Retail Consortium said
  • "While we may start to see cost pressures beginning to feed through into prices next year, we don't expect any sudden spikes or surges, and the timing and extent of increases will differ from one category and retailer to the next"
 

Bank of England’s Carney: Tighter Monetary Policy Would Be Excessively Costly


In a speech on Monday, Bank of England Governor Carney reiterated that the Monetary Policy Committee (MPC) had only limited tolerance for an overshoot of inflation, while continuing to find a balance between the economic trade-offs posed by the referendum and Sterling’s decline.

Carney was confident surrounding the short-term outlook with households looking through the Brexit-related uncertainties at present with the signs of economic slowdown notable by their absence, while perceptions of job security remain strong.

Indicators suggest continued solid UK growth and the pace of fiscal consolidation is expected to be slower, which will help support demand conditions within the economy.

The savings ratio, however, has fallen towards historic lows and consumer borrowing has increased.

The Bank of England expects consumption growth to slow as higher inflation has an impact on real incomes.

Historically, the evidence also suggests that episodes of consumption-led growth tend to be slower and less durable than an investment-led expansion because spending outpaces income growth and higher debt levels eventually force a correction.

According to Carney, returning inflation to the 2% target in three years’ time would require interest rates to be around 100 basis points higher than at present, but this could increase unemployment by around 250,000.

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UK data - BRC sales like-for-like for November: 0.6% y/y (expected 1.7%, prior 1.7%)


British Retail Consortium data

Sales slowing in November (admittedly after a big result in October)

Points raised by BRC:
  • Spending generally stable
  • Retailers were relying on promotions
 

October 2016 UK industrial production -1.3% vs 0.2% exp m/m


Details of the October 2016 UK industrial and manufacturing production data report 7 December 2016

  • Prior -0.4%.
  • -1.1% vs 0.5% exp y/y. Prior 0.3%. Revised to 0.4%
  • Manufacturing production -0.9% vs 0.2% exp m/m. Prior 0.6%
  • -0.4% vs 0.8% exp y/y. Prior 0.2%. Revised to 0.1%
 

UK data - RICS house price balance (November): 30%(expected 26, prior 23)


Royal Institution of Chartered Surveyors (RICS) House Price Balance

  • British house prices hit a seven-month high in November
  • However, the number of prospective buyers remains low
  • Recovery in the market is likely to be modest given the uncertain outlook for Britain's economy
  • Prices rose in most regions but fell in London albeit at a slower pace than in recent months
  • Expectations for price increases in the capital over the coming year remained low as higher taxes on buy-to-let investors and on expensive properties continued to weigh
 

October 2016 UK construction output -0.6% vs 0.2% exp m/m


Highlights of the October 2016 UK construction output report 9 December 2016

  • Prior 0.3%
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