GBP Brushes off Weaker Retail Sales and Mortgage Approvals Data
In the UK, we saw mortgage approvals decline to a 21-month low of 40K in November.
Via Bloomberg: UK Mortgage Approvals Decline to 21-Month Low as Housing Market Weakens
U.K. mortgage approvals fell to the lowest level since March 2009 last month as the housing market weakened amid the prospect of the government's fiscal squeeze.
The number of home loans fell to 40,000 from 45,000 in November, the Bank of England said today in London, based on data from six banks. The value of loans fell to 8.9 billion pounds ($14.2 billion), with net lending dropping to 800 million pounds, the lowest since records began in January 2009.
Recent data have shown a mixed picture of the U.K. housing market as the prospect of the biggest government budget squeeze since World War II and tight lending conditions hurt demand. Mortgage approvals are at less than half the level seen at the peak of the market in 2007.
The UK economy is about to begin its austerity measures and unlike in Germany and the Euro-zone, the view seems less optimistic about what is in store for the UK. Retail sales fell 0.8% for the month of December, expectations had a smaller decline of -0.2%. Retrenchment by consumers will be a headwind for growth.
With inflation higher, the BOE will not be able t provide stimulus, and may in fact have to think about raising interest rates, which is why the GBP had been stronger of late. However, the prospect of higher interest rates during a low-growth environment will only work to hurt the GBP in the medium term. We can see in the EUR/GBP pair that its the Euro that is driving the action the past two weeks.