Yesterday’s UK data came in line with expectations albeit with a slight dovish tone from the Bank of England’s (BOE) governor which saw the GBP lose some ground against it competitors. The Official Bank Rate was left unchanged at 0.25% while the Asset Purchase Facility was left unchanged at 435B, both figures were unanimously voted on by all of the members of the Monetary Policy Committee, which showed that the UK economy is more resilient to the Brexit uncertainty than initially thought. BOE Governor Carney was quick to add that 2017 would be a telling year with the bank standing ready to act either way of the current 0.25% interest rate should the BOE find it right to do so. More uncertainty is expected politically form the UK as PM May continues to battle it out with the EU regarding the official triggering of article 50 which would begin the long process of the UK divorcing from the EU. Investors will be watching for signs of how the transition is planned and executed with further downside expected in the GBP the more difficult the divorce proceeding are while a smoother transition will ensure stability in the GBP as the better than expected transition is priced in.
Today’s key data comes in the form of US housing data which given that it was the mortgage crisis which triggered the global economic meltdown since 2008, will be of significant importance to investors in the new post Trump and fed rate increase environment. Building Permits are expected to come in at 1.24M, indicating that 1.24M building permits have been issued in the previous month while housing starts is expected at 1.23M, indicating that 1.23M construction project have begun in the previous month. Both figures are interconnected as the number of permits granted will directly affect the number of housing starts. The numbers are important because the housing markets links several parts of the economy from raw material to financing to labour to the final fixture and decorations. Better than expected figures will bode well for the USD, which will continue to enjoy its 14 year highs while worse than expected data will result in a sell off of the USD as markets price in the expected cool off from the decrease in actions.