31 Aug 2017

Market Brief: Strong Nonfarms expected?

Shaun Garrett

Dealing team

In stark contrast to Tuesday’s disappointing Nationwide housing data, yesterday’s UK mortgage lending figures produced a good reading.

Latest rates   Today's data release
1.2909 1.0850 1.6330 1.6314 1.2441 13:30 US core PCE
GBP/JPY GBP/HKD GBP/ZAR EUR/USD EUR/GBP 15:00 US pending home sales
142.60 10.1014 16.7798 1.1895 0.9215
Investec currency forecasts as at 27 July 2017 Key levels
  Q3 '17 Q4 '17 Q1 '18 Q2 '18 Support Resistance
1.29 1.30 1.30 1.31 1.2770 1.3125
GBP/EUR 1.13 1.14 1.13 1.13 1.0750 1.0915
market brief daily chart
Market overview

July’s approvals for house purchases firmed to 68.7k from an upward revised 65.3k (consensus and Investec 65.5k), the firmest outturn since March last year. Although net lending softened to +£3.6bn from June’s spike of £4.1bn, at £21.6bn, seasonally adjusted gross lending was at its highest since January this year. On the consumer credit side, net lending was weaker than expected at +£1.2bn (June +£1.4bn), below market and Investec expectations of a £1.5bn gain and a low since December 2016. Although shoppers now have a total of £16.6bn on their credit cards, a record high, the rate of increase is easing - total debts on cards rose by £440m on the month, down from £506m in June. “While consumer credit growth is still too strong for the Bank of England’s liking, July’s slowdown further dilutes the case for an interest rate hike any time soon,” said Howard Archer, chief economic advisor to the EY Item Club.

Aside from the devastating headline coming out of the US surrounding Hurricane Harvey and the potentially huge damage bill that may be incurred markets are casting an admiring eye over what we might expect from Friday’s Nonfarm Payroll report following a stronger than expect ADP employment report yesterday. Payroll Processor ADP said the private sector added 237,000 jobs in August, ahead of the expected 185,000. The Nonfarm Payroll number of Friday is expected to report 180,000 payroll gains by businesses and federal, state and local governments. ADP’s August tally, however, may substantially overshoot the official report. In August over the past five years the government reported a relatively sluggish average of 146,000.

The day ahead

On the data front things pick up another level again today as the week draws to a conclusion. At 10 am today after a raft of regional individual inflation releases we get a look at the Eurozone inflation number. In the US this afternoon at 13.30 the Fed’s preferred measure of inflation (the PCE) is released. To wrap up the day US existing home sales numbers are released at 15.00.

Thought of the day

The current strength of the euro versus the pound is causing headaches for many British businesses, but spares a thought for tourists flying out of UK airports who have forgotten to change their holiday money in advance. According to a new survey out today, this lack of foresight, or perhaps just the convenience factor, is costing them dearly as they would struggle get above parity in the GBPEUR rate! The worst airport offender was Southampton airport where your pound would only get you 86 euro cents compared to the market rate of €1.08 at the moment. The euro’s flight path this year has been steep and if you are worried about it taking off even further get in touch with Investec FX dealing desk where will be happy to help you chart a course.

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