Pound Boosted by Events Elsewhere
The pound to US dollar rate was in a celebratory mood ahead of New Year’s Eve, after advancing back above the 1.31 level yesterday. Having been shackled by renewed fears of a no-deal Brexit over the Christmas period, the pair received a welcome boost from events elsewhere. Most notably from a thaw in tensions in the US-China trade war, following speculation that the two superpowers had reached an agreement earlier this month. This triggered a dip in the dollar’s value, as demand for the safe-haven currency was eroded by growing optimism that Donald Trump and his Chinese counterpart Xi Jinping will meet in January to sign a phase one deal.
After a week without any economic data on the menu, the UK economy – and the pound – finally had some figures to digest yesterday. UK mortgage approvals rose in November to their highest level in nearly three years, signalling a stabilisation in the housing market. Banks approved 43,715 mortgages last month, compared to just 41,312 in October – this represents the highest total since January 2017.
US Pending Home Sales Rise in November
US economic data releases came in thick and fast yesterday. According to the Chicago Purchasing Managers’ Index (PMI), a slump in factory sector activity in the region eased more than expected in December. However, the PMI slipped by 1.2 points during the fourth quarter, compared to the previous three months, to reach 46.2 – its lowest mark since the second quarter of 2009.
US pending home sales rose in November, as contracts to buy previously owned US homes increased by 1.2% to a reading of 108.5 according to the National Association of Realtors. Compared to 12-months ago, the figures were up 7.4%. Pending home contracts are considered an indicator of the future health of the domestic housing market because they become sales just a few weeks later.
Today is another busy day in the economic data calendar for the dollar. We kick off with the Housing Price Index, which is swiftly followed by the S&P/Case-Shiller Home Price Indices and a Consumer Confidence report.
The pound must wait until after New Year’s Day bank holiday for more economic news. Thursday’s Markit Manufacturing PMI isn’t just the first release of the year; it’s a key indicator of business conditions and the overall economic condition in the UK.
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