Kim Cramer Larsson
Areas covered in this webinar by Saxo Bank technical analyst Kim Cramer Larsson include EURUSD, USDJPY, GBPUSD, EURGBP, gold, silver, S&P 500, the Nasdaq, the Dax, the FTSE and the Dow Jones.
Article / 18 June 2014 at 5:54 GMT

3 Numbers: BoE minutes, US mortgage applications, US Fed forecast

editor/analyst /
United States
• BoE minutes under scrutiny for rate hike signals
• US mortgage applications unlikely to repeat most recent surge
• GDP growth forecast is key element of FOMC outlook

Britain’s bullish economic news of late will come into focus again today with the release of the June Monetary Policy Committee minutes. The main issue on Mr. Market’s mind: Is there a growing consensus among policymakers for an early rate hike? Later, we’ll see new numbers on weekly mortgage applications for the US--news that comes a day after an unexpectedly weak report on housing starts and permits. Soon after, the Federal Reserve releases a new edition of its quarterly economic projections, followed by Fed Chair Janet Yellen’s press conference.

UK: Bank of England Monetary Policy Committee Minutes (08:30 GMT): The crowd will carefully dissect today’s minutes in search of clues on whether there’s a consensus for an early rate hike. The subject is front and centre after last week’s hawkish comments from Bank of England governor Mark Carney, who said that tightening monetary policy may start sooner than previously assumed. Depending on the analyst, the first rate increase for Britain may arrive as early as this November or as late as February 2015. One variable that may determine timing: the decision on whether to use so-called “baby steps” that roll out relatively small, incremental increases through time vs. larger, less-frequent, and perhaps slightly delayed hikes. In any case, it seems likely that the cumulative increases will add up to a policy rate somewhere in the 1.0 percent-to-1.5 percent range by the end of next year vs. the current 0.5 percent.

Bank Street

Pundits must read between the lines for clues on UK rate hike timing. Photo: iStock

Indeed, Britain’s economy is growing at an encouraging pace, and consistently so. That includes the sight of housing prices still rising sharply: 9.9 percent in April vs. a year earlier, the Office for National Statistics (ONS) reported yesterday. That’s up from an annual gain of eight percent in March—a pace that represents a four-year high.

There's growing cries that the central bank can no longer afford to let the bullish momentum in house prices roll on without a stronger policy response. There are other options beyond rate hikes, but some economists still say tighter policy is required. Although some private-sector data sets now show that the housing market is cooling slightly, it’s likely that the ONS numbers will further fuel speculation that that the BoE will be forced to start raising rates before the year is out. The UK economy overall exhibits encouraging signs of strength. In particular, demand for labour is growing while supply is shrinking. “The availability of permanent candidates falls at sharpest rate since November 1997,” according to the REC/KPMG Report on Jobs for May.

It’ll be interesting to learn how the BoE’s monetary policy committee is interpreting the recent economic strength. Was the previous vote on keeping rates unchanged unanimous? That’s the general forecast, but if only one member breaks from the group the market will jump on the news as another sign that the hawks are taking over. In any case, today’s release will be one of the more closely read minutes in recent history.

US: Mortgage Applications (11:00 GMT): Housing starts and newly issued building permits fell more than expected in May, the government reported yesterday. The year-over-year decline in permits looks particularly troubling as it signals the potential for an even lower rate of housing construction in the months ahead. But the mild rebound in sentiment among home builders for June suggests otherwise.

Ditto for last week’s update on mortgage applications, which surged 10 percent in the first week of June vs. the previous week. A repeat performance is unlikely in today's release, although a modest rise would stoke optimism that the housing market will continue to expand. But it’s unclear at this point what to expect. Indeed, the previous jump in applications was at least partly due to seasonal volatility related to the Memorial Day holiday at the end of May. Today’s update will offer a clearer profile of the trend.

The news will be timely in the wake of the disappointing numbers on starts and permits. Commenting on yesterday’s housing report, one economist said that “the data does not provide the kind of assurances that the Federal Reserve would like to see. The housing market, in particular, remains a question mark as it is not able to gain the traction the Fed expected to see by this time in the economic cycle,” advised Mesirow Financial’s chief economist.

With that in mind, today’s applications report sets us up with the last housing-related news ahead of the Fed’s new forecasts that hit the streets later in the day.


US: Federal Reserve FOMC Forecasts (18:00 GMT)
: One of the key news events to watch in today’s Fed announcement is whether the central bank’s will lower its growth forecast for the economy. In the previous quarterly release of predictions, the Fed tweaked its GDP expectations down a touch. For all of 2014, for instance, the projected rise as of March slipped to a 2.8 percent-to-3.0 percent range, off slightly from the 2.8-to-3.2 percent range published last December.

For context, consider that the International Monetary Fund (IMF) on Monday sharply downgraded its US GDP outlook to two percent for this year from 2.8 percent in the previous estimate. Although the IMF advised that the economy has strengthened since the winter slump in this year’s first quarter, the rebound “provides only a partial offset.”

The Wall Street Journal yesterday reported that Nigel Chalk, the IMF's US mission chief “expects ‘relatively high unemployment and a lot of slack in the labor market’ to persist, and consumer inflation to remain well below target into 2017.”

The labour market assumption still sounds plausible, but yesterday update on consumer prices for May suggests that Chalk's analysis on inflation deserves a bit of revising. The consumer price index increased 2.1 percent in the year through last month—the most in 15 months and slightly above the Fed’s 2.0 percent target.

“The chances that [the Fed] will raise interest rates before the middle of next year are increasing,” wrote an economist at Capital Economics in a research note on Tuesday.

Does the Fed agree? Today’s economic projections, followed by Fed chair Janet Yellen’s press conference at 18:30 GMT, will drop a few clues.

— Edited by Clare MacCarthy
Ann Smith Ann Smith
Mortgages in US is the biggest problem today. People want to have their own houses. But it’s really hard to pay back these loans. I pay back my mortgage loan with help of <a href="">cash loans offered by the online Store</a>. It’s a good and trusted company which is enough popular nowadays. These loans help people to find out the solution of financial problem and little by little to pay credit.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail