The pound managed to dust itself off and begin reversing its losses against the dollar yesterday, having plummeted to a more than five-month low against the US currency on Tuesday. Strong demand for the safe-haven dollar and the lifting of social restrictions in England, amid a global surge in Covid-19 infections, had weighed on the pound vs dollar rate earlier in the week as investors became jittery.
With a light data calendar on both sides of the Atlantic on Wednesday and the dollar taking a breather from its march higher, the pound found itself on firmer footing. A leading indicator of the health of the US housing market was worthy of some investor attention, although its impact on the pound to dollar rate was muted. Applications for US home mortgages fell last week, fuelled by a decrease in refinancing and purchase activity as mortgage rates increased.
On Wednesday, the Mortgage Bankers Association (MBA) revealed that its seasonally adjusted housing market index dropped 4% in the week ended 16 July from the previous week – representing a 2.8% decline in applications to refinance existing loans.
In an accompanying statement, the MBA’s associate vice president of economic and industry forecasting, Joel Kan said: “Limited inventory and higher prices are keeping some prospective homebuyers out of the market,” adding “Refinance activity fell over the week, but because rates have stayed relatively low, the pace of applications was close to its highest level since early May 2021,”
The MBA mortgage figures came hot on the heels of data from the Commerce Department on Tuesday showing housing starts accelerated in June, while building permits slid to an eight-month low.
By this morning, the pound to dollar rate had edged above 1.37 having sunk to 1.35 on Tuesday.
The first notable data set from the UK economy is slated for release this evening. The GfK Group Consumer Confidence Index – a measure of the level of consumer confidence in UK economic activity – is forecast to slip slightly lower. The floodgates open on Friday with three influential economic indicators in the diary: Retail Sales for June, the Markit Manufacturing Purchasing Managers’ Index (PMI) for July, and the Markit Services PMI for July – with the reading for the UK’s dominant services sector expected to dip slightly.
Initial Jobless Claims for the week ended 16 July and the Chicago Fed National Activity Index for June are scheduled for release from the US economy today. Tomorrow sees the Markit Manufacturing PMI and Markit Services PMI hit the headlines.