By Simon Eastman
As Europe took a break for Labour Day, the markets started the new month with little to write home about as the UK had a flurry of low-level data releases in the morning before the US markets opened after lunch.
Consumer credit dropped significantly from last month and forecasts, with consumers borrowing just £875m in comparison to the previous months £1.307b, showing that consumer spending on credit, decreased significantly. This is generally seen as a negative for the currency, although a very high reading can also be negative as it indicates consumers could be borrowing to live beyond their means.
Mortgage approvals for last month also dropped by more than was forecast showing fewer people were getting mortgages as uncertainty over interest rates rumbles on amongst lenders and consumers. Given the low value data, the markets moved little off the results, but it gave us an insight into the wider economy for the UK and more credence to the more significant releases to come, like retail sales, inflation, and the upcoming interest rate decision from the Bank of England next week. With the EU closed for trading, despite the poor figures, the pound managed to make some further gains against the single currency, moving up nearly half a cent over the day.
Cable followed suit , with GBPUSD moving up nearly a cent ahead of the US market opening, helped along the way by some early released US jobs data which came in under forecast. The trend bucked mid afternoon though as the key manufacturing PMI data came out better than expected at 48.7, and closer to the all-important 50 mark which dictates growth in a sector. The result for the greenback was a half cent gain against both sterling and the euro, the latter making a 7 percent gain against the dollar in the past few weeks, whilst the pound has gained 5 percent, so just a small dent in its recent losses.
As the week closes, Europe is back open for business and kicks off the day with its inflation readings and unemployment rate. These have the potential to dent the recent gains the pound has made, should inflation come in lower than expected, this would give less reason for the European Central Bank to contemplate another interest rate cut which would likely be seen as a positive for the euro.
The UK has nothing to release today so we turn focus across the pond after lunch for the all-important average earnings, unemployment, and non-farm payrolls figures. As our regular readers will know, the NFP can be wildly different to expectations and as such, have a dramatic impact on the exchange rates, USD primarily but also due to the currency see-saw effect, the euro and pound. For anyone with an upcoming transfer to make involving any of the major currencies mentioned, get in touch with the team at your earliest opportunity to run through your requirements and get some friendly guidance over the options available to you to make your money go further.