August 01, 2022

Daily Report 01/08/2022

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UK mortgage approvals declined to 63,700 for June from a revised 65,700 previously and slightly below consensus forecasts with the lowest reading since June 2020. There was, however, a stronger than expected increase in consumer credit with the strongest increase since May 2019 and overall personal lending remained firm at £7.1bn from £8.9bn the previous month.  Sterling was unable to draw any support from the data and lost ground during the day with some fears that higher borrowing reflected difficulties in meeting commitments.  Sterling dipped to lows against the dollar after the US data, but there was a sharp rally into the London fix as the dollar posted a wider rapid retreat. CFTC data recorded a small net decline in short Sterling positions in the latest week and there will be some pressure to cover shorts into Thursday’s Bank of England policy decision.

No Key Data

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The headline Euro-Zone consumer prices inflation rate increased to a fresh record high of 8.9% for July from 8.6% previously and above consensus forecasts of 8.7%. The underlying rate increased to 4.0% from 3.7% and slightly above expectations of 3.9%. GDP data was stronger than expected with a flash growth estimate of 0.7% for the second quarter after an upwardly-revised 0.6% increase for the previous three months. The Euro held a firm tone into the US open, but hit selling interest on approach against the dollar with no support from the data.

Key Data 

Unemployment Rate Prev 6.6 Exp 6.6

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The US PCE prices index increased 1.0% for June with an annual rate of 6.8% from 6.3% previously. The core rate increased 0.6% on the month with the year-on-year rate of 4.8% slightly above the previous figure and market expectations of 4.7%.

The higher than expected reading triggered renewed concerns over inflation trends and reversed the sentiment that had been building after the Fed policy decision and weaker than expected GDP data. There fresh concerns that the Federal Reserve would have to be more aggressive in tightening monetary policy which triggered renewed dollar demand. The final reading of the University of Michigan consumer confidence index was revised to 51.5 from the flash reading of 51.1 with a recovery in the current conditions component. The 5-year inflation expectations index was revised slightly higher to 2.9% from the flash reading of 2.8%.

Key Data 

ISM Manufacturing PMI(Jul) Prev 53 Exp 52