The Euro to Pound Sterling (EUR/GBP) exchange rate was trading at a 7-year low on Wednesday as UK data showed that Mortgage approvals rose for the first time since June last month.
The Euro to Pound Sterling (EUR/GBP) exchange rate hit a session low of 0.7312
According to the British Bankers Association (BBA), the number of mortgages approved by British banks, increased to 36,394 in January, a rise from the 35,816 approved in the final month of 2014. Despite it being the first month on month increase since last June, the number of approvals was still 26% lower than the same time as last year.
Personal loans and overdrafts also rose by an annual basis of 3.9%, the strongest annual increase seen since the tail end of 2008.
‘There continues to be strong demand for personal borrowing which is at its highest levels in recent years. The housing market appears to be bottoming out with a slight increase in approvals for new purchases in the last month but this is still significantly down on the levels of activity we saw last year,’ said BBA chief economist Richard Woolhouse.
BoE Comments Supporting Pound (GBP) Exchange Rate
Sterling was also continuing to receive support from comments made by Bank of England policy makers.
Forbes said that interest rates in the UK could soon rise if inflation pressures rebound sharply over the coming months. She said that the risks from a return of inflation, asset price bubbles in the financial sector and levels of consumption and savings were moderate and manageable ‘at the moment’ but these merit close attention.
Bank of England Governor Mark Carney told Parliament’s Treasury Committee that the central bank was aiming to bring inflation back towards its targets of 2% over the course of the next two years. Policymaker Martin Weale also said that it might be necessary to start raising interest rates earlier than the markets expect.
While other central banks across the globe are easing monetary policy, including imposing negative deposit rates, in order to protect their economies from deflation, Carney has said U.K. interest rates are more likely to go up than down. This sentiment has been the main factor, which has allowed the Pound to advance by as much as 5.6% against the Euro so far this year.
Market attention will now focus on a speech due to be given by European Central Bank Governor Mario Draghi. With concerns over the Greek bailout eased for now the focus will be on the Eurozone’s dismal inflation outlook. Draghi is expected to give more detail on the announced €1.1 trillion quantitative easing programme due to begin in March.