Rational FX: Halifax house price data way below expectations in 2010 [11/01/2011]
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Yesterday’s Economic Data
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House price data from Halifax fell much more than expected and throughout 2010 it fell more than it rose. Even though interest rates are low, credit is not as easily available to purchase property. If the effects of QE work and more people are employed, banks could start lending and house prices will rise… interest rates will go up.
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French Industrial Production came in better than expected and showed a turnaround. This is inflationary data for the Euro as increasing production is from higher demand, as businesses continue to grow they will push up inflationary pressure and cause the ECB to look at raising interest rates. Of course this is one country out of 27!
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Euro Investor confidence was positive, however the feeling is that the money is being invested into emerging markets rather than domestically.
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ECB President Trichet stated inflation in food prices caused them to miss their inflation target last month. With the higher yields for euro zone bonds means that more money will need to be produced by these economies to pay off the interest on these loans and inflation can spiral out of control if the flow of money and prices are not kept stable.
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BRC Retail Sales Monitor reported a fall of -0.3%, going forward we expect to see this figure affected as a result of spending cuts and the VAT rise. However high street earnings have showed that supermarkets fared well over the recent weather turmoil. Retail Sales are a measure of confidence in the economy and influence interest rates and the recent BOE split on rates shows that inflation will soon start to edge up. We’ve seen a recent turnaround in Sterling’s retreat against the US Dollar, and see 1.5340 as a big support level at the moment.
Today’s Economic Data
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There is no data out from the Euro Zone
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Japan and China release inflationary data in the form of Current Account, Bank Lending and M2 Money Supply. China have recently increased their interest rate and we have seen a reduction in their trade balance which shows that domestic demand has started to improve – however domestic or non-domestic is both inflationary and we could see them increase rates again. China are very reluctant to re-evaluate their currency against the US Dollar… But to control inflation (and keep the peace), at some point they may have to!
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US Wholesale Inventories are expected to come in lower than the previous month and will show that stocks are moving and businesses will need to reorder.
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UK Nationwide Consumer confidence is expected to show a reversal to positive. This and Retail Sales will feed into the next consumer spending figure and will add to Sterling’s strength against the Dollar and Euro.
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Currencies
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High
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Low
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Support
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Resistance
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GBP/EUR
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1.2034
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1.1988
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1.1900
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1.2050
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GBP/USD
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1.5602
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1.5473
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1.5470
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1.5580
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EUR/USD
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1.2961
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1.2873
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1.2850
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1.2970
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We wish you a very nice day.
