Good morning,

Slow and low

We’re nearly there, Friday is nearly upon us and there may be something to talk about. One measure of market volatility is showing that this August has been the quietest since 1994 and I’m struggling to remember a doldrum as distinct as this one.

Needless to say price action has been extremely slow although GBP managed a rally to the highest level in 3 weeks against the USD as traders squared up positions ahead of tomorrow’s UK and US GDP numbers as well as Janet Yellen’s speech at 3pm tomorrow afternoon.

UK mortgages hint at slowing

The move higher in sterling coincided with the latest UK mortgage numbers. The number of mortgages written in the month of July totalled 37,662 against an estimate of 38,000 and down around 2,000 on the month. This is nothing strange and the average swing in mortgage completions in the past 3 years has been about 1,400 mortgages a month however the annual rate is currently plumbing a level of -18.4%; the UK housing market is starting to wobble and slow.

That being said the Royal Institute of Chartered Surveyors have seen their house price expectations index rebound from its post-Brexit falls so we cannot be sure of a longer term fall off in prices but the most recent numbers are not looking great.

Jackson Hole closing in

Dollar continues to trade a little weaker as traders wait on tomorrow’s speech from Janet Yellen and while I think that the broad takeaways from her speech will likely see an increase in expectations of a December rate hike, the pricing out of a similar move in September will likely limit any dollar gains.

The Fed’s next hike is not going to be about containing rampant inflation expectations of course, but more that leverage and risk-taking is becoming a problem, if it isn’t already, and that those excesses need to be curbed sooner rather than later.

We’ll find out in 30hrs or so whether we’re right or not.

In the meantime, have a great day.

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