In further proof of a cooling UK housing market, mortgage approvals fell to their lowest level since June 2020 in November, according to yesterday’s reading.
Today’s services and manufacturing output data will likely add to all-round proof of a cooling economy.
Economic cooling was the trend on both sides of the Atlantic. In the US, Federal Open Market Committee (FOMC) minutes released yesterday showed the committee expects growth this year to be below trend, but that is needed to bring supply and demand into balance and reduce inflationary pressures.
Yet as Pantheon Macroeconomics noted: “FOMC members remain focussed on current inflation and inflation risks, with fear of overkill on monetary policy receiving very little attention.”
Amid these data points, Cable closed the Wednesday session 0.75% higher at 1.205, effectively recouping Tuesday’s losses.
But the pair went bearish this morning, cutting back to 1.202 in the Asia trading window.
GBP/USD hits low note after Wednesday surge – Source: capital.com
Advance Eurozone inflation data is throwing out some surprises. Headline inflation in December is expected to read below 9% tomorrow (although core inflation is likely to stay constant).
The downward revision follows yesterday’s single-digit German inflation surprise, sparking renewed hope for a gentler central bank policy and improvement in the Eurozone bond market.
On that note, bund yields, despite edging higher this morning, have dipped to 2.3% from 2.57% on 30 December.
EUR/USD closed 0.6% higher yesterday, and has so far remained flat at 1.060 today.
EUR/GBP closed slightly lower yesterday, but the pair has added 0.3% to 88.21p in this morning’s Asia trading hours.