The decline of the European commission economic confidence and mortgage approvals lifted the pound in the morning session. The market experts sent caution regarding the impact of Brexit in the foreign exchange-market as the pairing of Euro to pound eased today.
At the time of writing, GBP/USD increased 0.12 percent to 1.3096. The pair opened at 1.30978 with an Intraday high of 1.31024 and Intraday low of 1.30964. As seen in the image below, the band was wide which meant that there’s a high volatility. The pair also went beyond the upper barrier, thus, it was safe to say that it was overbought at some time today.
Considering the dots of the Parabolic Sar, there’s a chance the pair may have a bearish momentum later today. However, a recovery could happen in the late trading session if the price happens to contract.
Euro Region’s Economic Confidence
Based on the report released late Tuesday night, European Commission’s economic confidence fell from 104.5 to 103.5 in August, lower than the forecasted 104.1 by the experts. Capital Economics’ European Economist Jack Allen explained that August fall in the Eurozone economic sentiment indicator supports their long held view that growth in the currency union will slow in the second half of this year.
“The sectoral breakdown confirmed the fall in consumer confidence and revealed declines in the services, retail and industrial indices. … The general weakness of ESIs across the Eurozone suggests that more fundamental forces are weighing on growth, such as the fading boost from previous declines in oil prices and the Euro exchange rate,” Mr. Allen added.
On the other hand, the Greek business and consumer confidence increased, followed by the improvement of the Spanish inflation. Given the situation, the European Central Bank may need to come up with better stimulus as soon as possible after its scheduled meeting in September.
Mortgage Approvals Data Decline
Further to this, mortgage approvals dropped to an 18-month low last month after the conclusion of the UK referendum. It turned out that the housing market was greatly affected and could fall even further as predicted by the analysts.
According to the data provided by the Bank of England, the lowest monthly approvals by banks and building societies were recorded last month. From 64,152 in June, it fell to 60,912 in July – reflecting the market uncertainties brought by Brexit.
A well-known economist shared that housing market activity is likely to be limited over the coming months and prices will weaken as heightened uncertainty following the UK’s vote to leave the EU. He explained that Brexit affected the consumer confidence and willingness to engage in major transactions.
Bottom Line
Looking through the economic data, there’s a huge possibility that the ECB would have a hard time to make a significant monetary policy adjustment. Despite its initial forecast regarding the absence of post-Brexit impact on the global market, other sectors have felt the impact in little ways. In line with this, the pound may stay in the green territory for quite some time.