24.02.2016 19:20 American focus: the pound has updated a seven-year low against the dollar
The dollar significantly weakened against the euro, reaching a minimum of yesterday's session, the cause of which were technical factors, as well as weak US data. The preliminary report submitted at Markit, showed that activity in the US service sector deteriorated sharply in February, reaching a 28-month low and completing the 27-month series of sustainable expansion. Pre-Purchasing Managers Index (PMI) for the services sector fell in February to 49.8 points versus 53.2 points in January. Economists had expected the index to rise to 53.5. Recall index value below 50 indicates contraction in activity in the sector. Respondents reported that the weak growth in new orders and uncertainty were the main cause of the deterioration of the activity of the economic outlook in February. Negative impact also had outages related to the heavy snowfall on the east coast of the country. The data showed that new orders growth slowed for the third consecutive time. Meanwhile, the employment index dropped to the lowest level since the end of 2009. Seasonally adjusted, the composite PMI index was 50.1 points against 53.2 in January.
Another report from the Commerce Department showed that sales of new buildings in the US fell in January to a 10-month high against the background of falling sales in the Western region, but in general the housing market recovery remains intact. Sales fell 9.2 percent to a seasonally adjusted annual rate reached 494,000 units, after a sharp increase in December. December sales rates have not been revised (544,000 units). Economists had forecast that sales of new homes, which account for about 8.3 percent of the housing market, will drop to 520 000 last month. Sales in the West, who noted a sharp increase in housing prices on the background of moderate reserves, fell by 32.1 percent to 110,000, the lowest level since July, 2014. Moreover, the percentage decline was the largest since May 2010. Last month, inventories of new homes on the market increased by 2.1 percent to 238 000 units, the highest level since October 2009. However, the housing is restrained.
The British pound continued to fall today, updating the seven-year low against the dollar. The pressure on the currency has a British exit from the EU perspective. Analysts believe that because of the uncertainty about the upcoming vote, investors will abandon the investment in UK assets. Analysts at HSBC said that voting for a way out of the EU would lead to a further drop in the pound by 15% -20% against the dollar. The Bank believes that the likelihood of such a development of events is equal to one-third.
Little also had the effect of today's data on Britain. British Bankers' Association reported that the number of mortgage approvals increased to 47,509 in January to 43,660 in December. It was the highest since February 2014 and well above the expected level of 45 200 Gross mortgage borrowing rose to 13.6 billion pounds from 12.4 billion pounds. This was 38 percent higher than a year ago and the highest since mid-2008. Borrowing to buy a house amounted to 8.6 billion pounds, compared with 7.7 billion pounds in the last month.
In addition, a quarterly survey from the Confederation of British Industry showed that retail sales balance fell to 10 percent in February. It was predicted drop in the next month to 2 percent, which would be the slowest since May 2013. "In general, conditions remain challenging for retailers - Raine said Newton-Smith, director of economics at the CBI -. While sales continued to grow and increased optimism expectations of sales growth are weak and retailers are still afraid to invest. " However, respondents expect a decent improvement in business conditions within 3 months.
The Swiss franc strengthened against the US dollar, reaching a peak on 16 February that it was due to the widespread weakening of the US currency and the publication of positive data on Switzerland. The results of the poll of investment bank UBS showed that consumer activity indicator rose again at the beginning of the year, mainly led by the improvement in consumer sentiment in the conditions of low oil prices and a marked increase in vehicle registrations. The indicator of consumer activity in Switzerland rose to 1.66 points from 1.61 in December, revised from 1.62, which was reported previously. Thus, the index extended its upward trend in the new year. "Improvement of the UBS indicator of consumer activity sends a positive signal to private consumption, - stated in the UBS bank -. However, unemployment may rise in the first half of this year, in response to the slowdown in GDP growth last year, thus holding back private consumption . " Investment bank UBS expects the labor market to recover in the second half of the year, which can lead to an increase in private consumption of 1.4 percent this year.