Market Drivers May 26, 2016
Cable wobbles on GDP, housing data
Yen dips on China Moody’s downgrade
Nikkei 0.09% Dax 0.27%
Europe and Asia:
GBP UK GDP 2.0% vs. 2.1%
GBP BBA Loans for House Purchase 40K vs. 45K
USD Durable Orders 8:30
USD Pending Homes 10:00
The pound came under pressure in morning London dealing today in the wake of lackluster housing and GDP data that suggested the UK economy is feeling the pinch of the Brexit vote on general business sentiment.
UK GDP printed in line on quarter on quarter basis at 0.4% but came in slightly lower at 2.0% versus 2.1% eyed on an annualized basis. However it was the underlying data that showed weakness. Exports were down and business investment was poor with only government spending and consumer spending offsetting the declines.
In addition the housing data from BBA Mortgage approvals was shockingly low at 40.8K verssu 45K the month prior. The number was the lowest reading since March of 2015 and indicates that Brexit’s greatest pressure may be on the housing market as house prices could fall triggering a slowdown across the whole UK economy.
Cable dipped below 1.4700 but found footing there for the time being ahead of the North American open. The pair has been remarkably robust as the market continues to dismiss Brexit concerns and if cable manages to climb above the 1.4750 level today the pair could challenge the key 1.5000 level before the referendum vote.
Elsewhere, USD/JPY came under some pressure in very thin trading in Asia with the pair dropping to 109.46 before finally recovering to 110.00 by mid morning European dealing. Comments by Moody’s regarding credit risk in China caused the initial swoon but the pair finally found some buyers and pushed back above the 110.00 figure.
In North America today the calendar is light with only Durable Goods and Pending Homes on the docket, so trading will likely be driven by risk flows from both equity and credit markets, but given the generally quiet state of affairs, the majors should remain tightly rangebound for the rest of the day.