UK mortgage approvals declined to 67,200 for October from 71,900 previously and below consensus forecasts of 71,000 for the month with a sharp overall slowdown in mortgage lending to £1.6bn. Consumer credit was also positive on the month, although the overall increase in consumer lending slowed to £2.3bn from £9.6bn. Sterling was unable to gain significant support despite a net improvement in risk appetite and gradually lost traction during the day. There were further doubts whether the Bank of England would push ahead with an interest rate hike in December, especially given the increased uncertainty triggered by the new Omicron variant. Increased expectations of a delay tended to undermine potential UK currency support. Overall, the UK currency dipped lower with a test of fresh 2021 lows against the dollar. There is liable to be choppy trading during the day due to month-end position adjustment. Risk appetite also dipped again on Tuesday which had an important impact.
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Euro-zone industrial sentiment declined marginally to 14.1 for November from 14.2 the previous month while services sentiment improved to 18.4 from 18.0 with both figures above consensus forecasts. There was a slight net improvement in the business climate index, but with concerns over a fresh retreat in the short term. The Euro posted renewed gains ahead of the New York open and pushed back but again failed to hold and dipped lower into the New York open as the impact of closing of carry trades faded again in choppy trading. The German CPI inflation rate increased to 5.2% for November from 4.5% previously which was above consensus forecasts of 5.0% and the highest reading since the middle of 1992. The HICP inflation rate also increased to 6.0% and has the highest reading since the series started. There were hopes that this would represent a peak inflation rate for Germany and the Euro failed to gain any significant support amid expectations of a dovish ECB policy. The Euro retreated before regaining ground towards the New York close. Markets will be on alert over month-end position adjustment on Tuesday which could lead to further choppy trading.
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10.00 Consumer Price Index – Core (YoY) (Nov) Exp. 1.9% Prev. 2%
10.00 Consumer Price Index (YoY) (Nov) Exp. 3.7% Prev. 4.1%
Fed Chair Powell will testify to Congress on Tuesday and in prepared remarks, he will say that factors pushing inflation higher will linger well into next year. Also, that the labour market is still tightening with diminishing slack, although the rise in coronavirus cases poses downside risks. The US Dallas Fed manufacturing index edged lower to 11.8 from 14.6 the previous month. After sharp gains on Friday, there was a retreat in US Treasuries on Monday with markets considering that the moves late last week have been an over-reaction in thin trading conditions.
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15.00 Jerome Powell Speech