The pound’s remarkable run saw GBP/USD rise for 10 consecutive days without breaking the previous day’s low. From the day the ECB dropped its bombshell about possibly changing the language around forward guidance of monetary policy on Thursday January 11th, (ironically in an attempt to smooth market volatility) GBP/USD rose almost 9 cents; its biggest 10-day gain since June 2009. In London trading earlier yesterday morning, the pound moved higher still and hit a best level of 1.4325 before then tumbling almost 2 cents into the US close as President Trump showed he has more clout in global FX markets than ECB President Draghi.
In an interview with Bloomberg Television in Davos, UK Chancellor of the Exchequer Philip Hammond said, “We’re very happy with where the currency is at the moment… Getting the inflation rate down - and a rising pound helps to do that - helps to drive increases in real wages, and that’s good for our economy and good for our society,” he said.
In economic news locally, mortgage approvals by Britain’s banks fell to their lowest level since April 2013 in December, according to trade association UK Finance. Banks approved just 36,115 mortgages for house buying, down from 39,007 in November and 19% lower than a year ago. The RICS survey last week was consistent with even lower levels of activity in this first quarter of 2018. Separately, the CBI’s latest distributive trades survey, showed UK retail sales at a slower pace than anticipated. The survey showed a balance of +12 for January, down from +20 in December. Sales for the time of year were the weakest compared to the norm for more than four years. Orders to suppliers also fell, and looking ahead retailers expect similar growth in sales volumes while orders are forecast to be flat.
Thus far, weaker UK economic numbers haven’t mattered at all to currency traders, though we’ll see if today’s Q4 GDP numbers have any impact. Consensus expectations are for a +0.4% q/q increase compared to the +0.5% rise which the Bank of England expected in its November Quarterly Bulletin.
The British Pound opens in Asia this morning at USD1.4125, AUD1.7590 and NZD1.9270.