After a net weaker move early on, the British pound nearly takes the top spot this week, popping higher after the Bank of England toned down expectations of negative rates.
United Kingdom Headlines and Economic data
U.K. mortgage approvals post best year since 2007 on tax cut
“Lenders approved 103,381 loans in December, compared with a revised 105,324 in November, the Bank of England said Monday. The median forecast among economists was for 100,000. It left the total for 2020 at 818,537, the highest since 2007.”
UK Manufacturing upturn constrained by COVID-19 restrictions and supply-chain disruptions
“The seasonally adjusted IHS Markit/CIPS Purchasing
Managers’ Index fell to a three-month low of 54.1
in January, down from December’s three-year high of 57.5.
Declining new order intakes and a steep reduction in input
stocks both weighed on the PMI level.”
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UK house price growth slows for first time in six months as end of stamp duty holiday looms
“According to Nationwide’s monthly house price index released on Tuesday morning, annual house price growth slowed to 6.4%, from 7.3% in December.
It said prices were down 0.3% month-on-month, after taking account of seasonal factors, and home ownership has risen for third year running.”
Sharp fall in business activity in January, but vaccine rollout helps lift optimism to its highest since May 2014
“At 39.5 in January, the headline seasonally adjusted IHS Markit/CIPS UK Services PMI Business Activity Index dropped sharply from 49.4 in December and signalled the fastest reduction in business activity for eight months. Around 41% of survey respondents indicated a decline in output during January, while only 15% registered an expansion. “
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Bank of England says banks will need six months to prepare for negative rates
“Negative rates effectively pay businesses and individuals to borrow money and penalize banks for depositing cash, therefore in theory encouraging them to invest and spend more — actions that can help the economy to grow.”
“However, they exert further downward pressure on banks’ profit margins, which if passed on to customers, could fail to have the desired effect.” This killed speculation of negative interest rates coming sooner than later, which is likely why we saw Sterling pop higher on the event.”
Slight reduction in UK construction output in January
“At 49.2 in January, down from 54.6 in December, the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index signalled a decline in overall construction output for the first time since May 2020. However, the rate of contraction was only marginal.”
“A renewed fall in commercial activity (index at 46.2) and another drop in work on civil engineering projects (45.0) stood in contrast with strong growth in the residential category (57.1). Nonetheless, the latest increase in house building was the slowest since the rebound began in June 2020.”
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UK house prices fall for first time since May: Halifax
“Halifax, part of Lloyds Banking Group, said house prices dropped 0.3% on the month in January after holding steady in December, a weaker performance than the average 0.3% increase expected by economists in a Reuters poll.”
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UK Permanent staff recruitment falls sharply in January
“The resurgence of the virus al so led to a renewed fall in
demand for permanent staff, while growth in short term vacancies moderated. Pay trends meanwhile weakened, with recruiters registering mild reductions in starting salaries and temp wages. Reports of redundancies related to COVID-19 led to a sustained increase in staff availability.”