The British pound nearly takes the top spot among the majors this week, continuing its rebound off of improving COVID numbers in the U.K. and comments from Bank of England members toning down negative rate speculation.
United Kingdom Headlines and Economic data
Monday:
After three consecutive monthly falls the average price of property coming to market surprisingly increases by 0.5% (+£1,522) this month, as upwards price pressure resumes
“First week in February versus 2020 sees Rightmove visits up 45%, with keen home-hunters sending 18% more enquiries, and the number of purchases agreed up by 7%”
“High demand outstripping supply and pushing up prices: new seller numbers are 21% down on prior year as owners of family homes delay coming to market, perhaps due to home-schooling distractions”
Plan to exit lockdown ‘cautious but irreversible’, says Boris Johnson
“Figures on Monday showed a 29% drop in the number of positive cases across the country, down to 9,765 – the lowest figure since 2 October.”
“There are still 23,000 or so Covid patients in the NHS – more than at the April peak last year – there are still sadly too many people dying of this disease; and rates of infection, although they are coming down, are still comparatively high.
“So we have got to be very prudent and what we want to see is progress that is cautious but irreversible. I think that is what the public, people up and down the country, want to see.”
Wednesday:
U.K. consumer price inflation was +0.7% in January vs. +0.6% in December
“The inflation rate is likely to remain below 1% until April, when the VAT reduction on hospitality expires and higher energy prices feed through,” said Brian Hilliard, chief UK economist at Societe Generale. “Nevertheless, we expect it to remain below the 2% target for a long time.”
Average UK house price surges by 8.5% to hit record high in December
“The ONS figures show average house prices increased over the year in England to £269,000 (8.5%), in Wales to £184,000 (10.7%), in Scotland to £163,000 (8.4%) and in Northern Ireland to £148,000 (5.3%).”
Bond-buying remains BoE’s stimulus weapon of choice – Ramsden
“For me it is the marginal monetary policy tool at present….For that reason, and assuming no material worsening in market functioning, I would envisage some further slowing in pace at some point in the remainder of the year,” Ramsden said.
Thursday:
Negative rates may be BoE’s best tool in future: Saunders
“BoE Deputy Governor Dave Ramsden said on Wednesday that bond purchases remained his preferred option if the economy needed more help.”
This may have toned down speculation that negative rates was right around the corner, and correlates with Sterling’s broad move higher against the majors on Thursday.
“The kind of unemployment rates that we had in the pre-pandemic period are what we should have as a guide to get back to,” Saunders said. “As long as unemployment is above those levels, we should think of the recovery as incomplete.”
Friday:
UK might need negative rates if recovery disappoints – BoE’s Vlieghe
“Vlieghe said he thought the likeliest scenario was that the economy would recover strongly as forecast by the central bank earlier this month, meaning a further loosening of monetary policy would not be needed.”
UK retail sales plunge as government borrows £8.8bn
“The closure of non-essential stores hit two sectors – clothing and footwear, and household goods – particularly hard. Clothing sales were down 35% from December, while household goods registered a drop of almost 20%.”
U.K. Service activity stabilizes in February after sharp downturn at start of 2021. Worsening supply disruption holds back manufacturing growth.
“At 49.8 in February, up from 41.2 in January, the headline seasonally adjusted IHS Markit / CIPS Flash UK Composite Output Index was close to the 50.0 no-change threshold.”
U.K. Manufacturing activity remains patchy – CBI Industrial Trends Survey
” The survey of 296 manufacturers also found that output increased in 11 of the 17 sub-sectors. However, growth in these sub-sectors was outweighed by sharp falls in others – particularly motor vehicles & transport equipment and food, drink & tobacco. Looking ahead, manufacturers anticipate output to be broadly flat over the next three months, marking a notable improvement on expectations of a significant decline in January.”
