The Pound received another excellent boost against all of the major currencies yesterday after the release of strong UK mortgage approvals for October from the Bank of England. Mortgage approvals jumped to just over 67,500 and considerably higher than the 65,000 expected. It all points to a resilient British consumer after the Brexit vote and this is already feeding through into the price of Sterling with gains over 1% seen throughout yesterday following the release.
It has recently been reported that tax receipts from stamp duty in London are significantly down at the moment bringing in less money for the treasury which is of concern at a time when the government needs revenue. A fall in London property sales as a result of the stamp duty changes for second properties and overall Brexit concerns are having some knock on effects throughout the economy. With the rate of stamp duty at 12% on properties over £1.5 million it is not hard to see why this is happening, at the very high end at least.
The mortgage approvals are therefore a good slice of data considering that the housing market is pivotal to the performance of the economy. It is also usually one of the very first areas to fall at the start of a downturn so the outlook in my view looks considerably brighter and this is likely to lend support to the Pound.
The photograph of the Brexit document blunder taken outside 10 Downing Street which suggests Britain would not remain in the single market is a rare insight, if you can call it that, into the government’s strategy on leaving the EU. Although the A4 page of notes actually says very little about Brexit it does nonetheless point to a “hard Brexit” which to date has been regarded as negative for the Pound. The highly unfortunate wording reads “What’s the model? Have your cake and eat it.” Amusingly there is a sign on the door when leaving the government building that reads “Stop! Are your documents on show!” The response from the EU is unlikely to be received too well. So far the reaction is that there will be no “cherry picking”. However disclosed letters between the British government and president of the EU council Donald Tusk show that relations are tense.
With no UK economic data released today it will be the biannual Financial Stability Report produced by the Bank of England which grabs the headlines. Bank of England Governor Mark Carney has waded into the Brexit carry-ons this week by pushing for “transitional arrangements” effectively filling in the middle ground and trying to form something of a compromise in the Brexit strategy. Any talk on this subject today is likely to have some impact of the price of Sterling.
Eyes are now focused on next weeks Supreme Court hearing which could allow Theresa May to invoke Article 50 without Parliamentary consent. Sterling exchange rates could reverse from their recent highs if this was to occur. Get in touch with your broker as soon as possible if you have an upcoming currency requirement that needs addressing, or email me here for more information.
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