UK mortgage approvals drop to 14 month low

It was a mixed bag of data for the pound last week. Worryingly for the UK, mortgage approvals were down to their lowest level in 14 months. This was heightened by the fact that house prices in England and Wales were seen to drop the day before. Poor German data made the pound look good, thankfully, but concern still lies with the fact that the UK isn’t out of trouble just yet. On the other hand, CBI data came out in support of British retailers who had the fastest sales growth in the 3 month to October for more than 3 years.

Looking ahead this week, we have manufacturing, construction and services PMI data out today, tomorrow and Wednesday respectively. It’s expected that numbers will be down month-on-month so any surprises to the positive will be a boon for GBP. We will also see an interest rate decision and QE releases on Thursday but those are both set to be overshadowed for more important manufacturing numbers (which are set to come in as strong for August).

To Europe, where Germany struggled to lead from the front again as their IFO Business Climate figures fell to a 22 month low – this is the 6th month in a row we’ve seen this trajectory. The concern here is that German (often referred to as the ‘engine’ of Europe) is not pulling the amount of weight required to help get the rest of the Eurozone on track. The big question still remaining is that of QE – ECB policy maker Noyer was seen to say that lowering QE cannot be seen as a reason to negate the need for full blown quantitative easing in the Eurozone. Poor German inflation data at the end of the week was another blow to EUR despite the German having put in a good unemployment data showing. We’ll see more German data out this week by way of manufacturing and services PMI (out on Wednesday), then the ECB’s interest rate announcement and German factory orders on Thursday which are hope to lift the struggling single currency.

USD had a fairly strong start to last week with housing numbers coming in surprisingly well for September. The main event was, of course, news that the US Government would end its quantitative easing programme. The opinion now is that QE has done its job in helping fan the flames of economic recovery and we did see some initial strengthening on the back of the announcement. For the dollar this week we’ll see jobs numbers on Wednesday, along with ADP non-farm employment change numbers.