FX Focus: Pound hits two-week high against the euro despite poor mortgage data

The pound was on the front foot on Wednesday (24 August 2016), hitting a two-week high against the euro despite some disappointing mortgage data. Having hit €1.1743 (£1) against the euro, its highest level against the common currency in two weeks, the sterling then retreated slightly and by mid-afternoon was trading at €1.1740 – 0.59% higher – against the euro.

The UK currency was also on the front foot against the dollar, gaining 0.26% against the greenback to $1.3225.

The pound's gains even though data released by the British Bankers Association earlier in the day showed mortgage approvals for house purchases in the UK fell to an 18-month low.

"A drop in UK mortgage approvals to a one-year low in July failed to dent sentiment towards sterling, with overall lending figures suggesting the Brexit vote has had little impact on consumers' borrowing appetite," said Chris Saint, senior analyst at Hargreaves Lansdown currency service.

Elsewhere, the dollar was largely unchanged against the yen at ¥100.27 ahead of Federal Reserve chairwoman Janet Yellen's speech at the annual Jackson Hole Symposium on Friday (26 August). The greenback, however, gained 0.38% against the euro, exchanging hands at 0.8880 euros.

Kit Juckes, global head of FX strategy at Societe Generale, suggested the dollar could rise even further in the coming months.

"If the US data remain mixed, and if the Fed remains on course to raise rates again one day, it will be sensible to slowly rebuild some long dollar positions – buying dollars on expectation they will increase in value in the future – in the coming days," he said.

Over the last couple of weeks, the message coming from Fed officials has been quite mixed and has done little to help the markets understand in which direction the US central bank will move. The Fed, which initially intended to raise rates four times this year, so far it has not done so once.

"The message from Stanley Fischer and William Dudley, both permanent voters on the Federal Open Market Committee, last week were quite hawkish," said Oanda's senior market analyst Craig Erlam.

"Should Yellen deliver an equally hawkish warning on Friday then I expect markets to respond accordingly, with December likely becoming the most likely meeting but September being more priced in that it currently is."