- UK housing data boosts Sterling
- Consumer confidence numbers dominate the day
I think I understand the
global warming message; if Britain ceased to exist tomorrow, China,
which is building a new coal fired power station every five weeks,
would create enough new greenhouse gasses in five weeks to eliminate
the savings that an absent UK would create. I think Mr Blair is
speaking to the wrong people and am I wrong in cynically thinking that
we shouldn’t be using global warming as a way to raise more tax. I
don’t however understand what’s happening with the UK housing market.
House prices and mortgage approvals are at a 2 year high, house prices
are increasing at the fastest pace in 2 years and that will force the
Bank of England to raise the UK base rate by 0.25 percent when they
meet next week. I guess this is what happens when mortgage companies
turn a blind eye to income levels as long as the l borrower promises
they can pay. This buoyant picture boosted the Pound yesterday which is
pressing the
uppermost ranges against the US Dollar and Euro and is threatening to
pop out of the top of these ranges for a brief spell. Today is all
about consumer confidence indices and we will see how UK, EU and US
consumers view their plight at various times of the day. We will also
get a report from the Chicago purchasing managers to shine some light
on US pipeline inflation. It’s the last day of the month though and
that could create a bit of profit taking in late trading and it is the
eve of All Hallows night which various ghouls, ghosts, undead and
departed spirits are expected to visit the living. This used to be
about haunting but now it is all about the worst US import ever
devised, ‘Trick or Treat’. In legal terms it is demanding goods with
menace but we all seem to turn a blind eye to that and most of the
nation will be indoors with the lights off pretending they’re out.
Those of you planning a move
to South Africa must be thinking all your birthdays have arrived at
once. The South African Rand has lost 50 percent of its value in recent
months and that means you will arrive in South Africa 50 percent
wealthier than you would have been just a few months ago. Several
factors are at work here, with ongoing concerns over the Government’s
widening budget deficit and the fall in commodity prices both weighing
on the ZAR. But, having declined so completely, the Rand must soon find
buyers who would like to take advantage of the oversold nature of the currency
and who would, like me, expect some level of recovery. It tested R15 to
the Pound but was found wanting as speculators took profit and we are
slowly but surely heading for another spike. However, commodities have
rebounded a tad and gold has regained some of its lustre, moving back
above $600 per ounce so any rise in the GBPEUR level
will be met by another wave of ZAR buyers. This should therefore be
considered a great ZAR buying opportunity for migrants. To do otherwise
could leave you on the sidelines waiting for R15 again but seeing the
exchange rate push below R14 and down into the low R13s.
The Pound is pressing higher
this morning after all the data mentioned in the main section. We will
have consumer confidence indices from both the UK and Eurozone today
and that should paint a picture of growing optimism amongst UK
consumers as evidenced by the rise in mortgage lending and house prices
but the picture in Europe is less clear. Worrying signs from the German
manufacturing sector and the advent of higher German VAT levels are
starting to be felt and that could drag the EZ consumer confidence
index lower. This is part of the reason for the push that we are seeing
in the GBPEUR exchange rate. This is severely testing the top of the
range and threatening a test of €1.50. However, the last three times
that GBPEUR has hit the top of this trend channel, it has failed and
the decline has been at least 4 cents. I appear to have been rather
bearish on the GBPEUR exchange rate for a while now but with central
banks everywhere diversifying their reserve holdings away from the US
Dollar, the Euro is a sensible target for their funds and we could well
see some sizable Euro buying. This is particularly so with EURUSD being
at rather attractive levels and traders who have been selling the Euro
through the month may wish to secure some of their profit before the
close of play.
Politicians say more taxes will solve everything.
The Temptations (Ball of confusion)
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
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