Midday Brief – Powell Speaks

A busy morning session in Europe saw another round of European Central Bank speakers, plus we got to see Chair Powell deliver yet more prepared remarks from Portugal.

Fed’s Powell said he expects moderate pace of interest rate decisions to continue, which provide a vague guide ahead for the market going into July.

It could still mean a further pause in July or a continuation of rate hikes again. Powell also says that they are monitoring the banking sector “very carefully” still, after the events in March to April.

Also, we saw an upward price movement in the British pound away from the lows of the week after Mortgage data proved to be a lot better than some were fearing given the rate situation in the UK.

Net approvals for house purchases in the United Kingdom, which serve as an indicator of future borrowing, increased to 50.5 thousand in May 2023, up from the revised 49.0 thousand recorded in the previous month and surpassing market expectations of 49.7 thousand.

However, despite the positive uptick, the latest reading still reflected a relatively weak housing market, influenced by the Bank of England’s unprecedented policy tightening and the persistent high levels of inflation.

Likewise, approvals for remortgaging, which only capture remortgaging with a different lender, increased to 33.6 thousand from 32.5 thousand in April.

The ‘effective’ interest rate, the actual interest rate paid, on newly drawn mortgages rose by 10 basis points to 4.56 percent in May, while the rate on the outstanding stock of mortgages also increased by 7 basis points to 2.82 percent.

Also we saw more comments from Bank of Japan finance minister Suzuki as the yen slide continues as he said that the central bank was closely watching FX moves.

He added that “one-sided and unstable moves are undesirable” and “Won’t rule out any options if FX moves are excessive”. The USDJPY pair continues to hover near the 145.00 mark.