HiFX comments on this morning’s mortgage lending data from the Bank of England
Commenting on this morning’s mortgage lending data from the Bank of England, Andy Scott, economist at HiFX, said:
“Sterling bounced back from a four and a half month low against the euro on Tuesday, after mortgage data from the Bank of England showed lending increased by the largest amount since 2008.
“This is good news – the pound has been under pressure against both the dollar and the euro over the past few weeks as market expectations for UK rate hikes have been pushed further into 2016; despite governor Carney’s suggestion of the first hike being around the turn of the year. GBP/EUR recovered from 1.3450 to 1.3540 following this morning’s data, but we expect the euro to strengthen further in the months ahead, driving GBP/EUR closer towards 1.30. GBP/USD rose from 1.5150 to 1.52, and we expect to see the dollar weaken as the Federal Reserve maintain a very cautious approach to tightening monetary policy, and for the pair to head towards 1.60.
“With some areas of the economy – particularly manufacturing – suffering from a weakening in activity due partly to the strength of sterling, the strengthening housing market and anticipated pickup in prices should keep economic sentiment positive. We’ve seen a fairly strong correlation between consumer confidence which is a key pillar of domestic demand and currently sits at a 15-year high, and house price growth over the years. With the global economy showing signs of weakening, especially in emerging economies and those that rely heavily on commodities, the strength of consumer spending in the UK will be vital to shoring up GDP growth in the coming quarters.”