Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Jul 29 08 07:36 GMT |

Overview & economic commentary The focus today will be on housing market related data in the UK and the US, with further bad news largely predicted. In the UK, we forecast mortgage approvals in June slumped to the lowest since comparable records started in 1999, to 38,000 from 42,000 in May and around one-third of their level last June. Net mortgage lending may have held up better, but we still predict a decline below £4bn for the first time since March 2001. The surprisingly rapid downturn in UK housing market activity primarily reflects the reduced availability of household secured credit as shown in the Bank of England's Credit Conditions Survey (CCS), which worryingly suggested further tightening to come. However, the impact of more cyclical factors is also likely to be increasing as house prices fall and economic growth slows, suggesting a quick rebound is unlikely. In contrast to the weakness of secured credit, consumer credit has held up well so far this year. We predict net consumer credit eased but remained above £1bn in June, although the latest CCS reported unsecured credit availability had been reduced. The CBI Distributive trades survey is also published this morning. In the US, the S&P CaseShiller house prices survey may show prices fell by over 16% yoy in May, from 15.3% in April and the most since it started in 2001. The impact of falling house prices, high oil prices and fears about the labour market could see US consumer confidence fall below the key 50 level in July. Currency commentary The dollar was under pressure from higher oil prices and profit taking yesterday. The prospect of a weak S & P/ Case Shiller house price figures for May this afternoon has led to the US currency trading near a 1-week low against the euro this morning. Sterling may come under more downward pressure in advance of BoE mortgage approvals and lending data this morning, after slipping against the euro yesterday amid evidence of further declines in house prices. The euro may be affected by German CPI data for June this morning, which may reflect the eurozone outcome on Thursday. Yesterday the Chinese renminbi recorded its biggest one-day drop against the dollar since it was de-pegged from the US currency in July 2005, triggering speculation that the People's Bank of China was moving away from its policy of a managed appreciation of the currency. Major data and events today German CPI (09:00) (prel) Jun +0.3% Y-O-Y +3.3% Jul (f'cast) +0.5% Y-O-Y +3.3% Median +0.5% Range zero:+0.7% French producer prices (07:45) May +1.3% Y-O-Y +6.7% Jun (f'cast) +0.8% Y-O-Y +7.3% Median +0.8% Range zero:+1.0% UK money supply, M4 (final, sa) May +0.3% Y-O-Y +10.0% Jun (f'cast) +2.0% Y-O-Y +11.5% UK consumer credit May +£1.4bn Jun (f'cast) +£1.1bn Median +£1.0bn Range +£0.8bn:+£1.3bn UK net mortgage lending (sa) May +£4.1bn Jun (f'cast) +£3.8bn Median +£3.7bn Range +£3.3bn:+£4.5bn UK mortgage approvals May 42K Jun (f'cast) 38K Median 37K Range 32K:42K UK CBI Distributive trades survey (11:00) Jun -9 Jul (f'cast) -12 Median -15 Range -19:-8 US house prices (S&P/CaseShiller)(May)(15:00) Apr Y-O-Y -15.3% Median -16.0% Range -17.0%:-14.8% US consumer confidence (15:00) Jun 50.4 Jul (f'cast) 50.5 Median 50.0 Range 48.0:52.9 World Trade Organisation (WTO) general council meeting (to 30 July) UK DMO auction of £2.5bn, 5.0%, March 2018 conventional bond Chart of the day: The Bank of England Q2 Credit Conditions Survey showed tighter household availability to come Lloyds TSB Bank http://www.lloydstsbfinancialmarkets.com Disclaimer: Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. 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