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What’s happening: The British pound remained elevated against the US dollar and euro on Monday, as investors assessed the latest economic reports.
What happened: The Bank of England’s hawkishness lent support to the sterling on the first trading day of the week.
The British pound held close to multi-year highs against the US dollar and climbed versus the euro on Monday, after hitting its strongest level since April 2022 last week.
Why it matters: Data released on Monday showed UK’s net consumer credit climbed by £1.3 billion in August, growing the most in three months, compared to £1.2 billion in the previous month, amid an increase in net borrowing.
Net borrowing of mortgage debt by individuals rose to £2.86 billion in August, versus £2.8 billion a month ago, hitting the highest level since November 2022. Net mortgage approvals for house purchases rose by 2,400 to 64,860 in August, surging to the strongest level in two years and came in higher than market estimates of 63,800.
UK’s economy grew by 0.5% during the second quarter, slightly below market expectations of 0.6% and decelerating from 0.7% in the first quarter. The country’s current account deficit widened to £28.4 billion in the second quarter, from £13.8 billion in the previous quarter but came in better than market estimates of £32.2 billion.
The sterling has remained elevated on speculations of the Bank of England remaining more cautious than the European Central Bank and Federal Reserve in lowering interest rates.
The BoE held interest rates unchanged in September, after lowering rates in August. Traders are fully pricing in one rate cut of 25 basis points (bps) by the end of the year. On the other hand, the ECB has already cut rates twice this year, with markets expecting two more cuts of 25 bps by yearend. The Fed is expected to lower interest rates by around 70 bps this year, after cutting rates by an outsized 50 bps in September.
The GBP/USD forex pair remained almost flat at 1.3375 on Monday, after hitting a 2.5-year high last week. The EUR/GBP pair rose to 0.8327, after hitting its highest level since April 22 last week.
What to watch: With no major economic reports from the UK this week, the sterling is likely to be impacted by inflation data from the Eurozone, scheduled to be released today, and the release of the NFP (nonfarm payrolls) report from the US on Friday.
Context: Shares of Carnival fell slightly on Monday, despite the company reporting better-than-expected third-quarter results.
Details: Carnival continues to witness upbeat bookings momentum, boosted by booking volumes for next year.
Carnival reported quarterly sales growth of 15.2% year-over-year to $7.90 billion, topping consensus estimates of $7.83 billion. Adjusted earnings came in at $1.27 per share, surpassing Wall Street expectations of $1.16 per share.
Its operating income climbed 34% year-over-year to $2.2 billion during the quarter. The company closed the quarter with $4.5 billion of liquidity.
“Our strong improvements were led by high-margin, same-ship yield growth, driving a 26 percent improvement in unit operating income, the highest level we have reached in fifteen years,” CEO Josh Weinstein said.
Management guided to growth of around 5.0% in net yields, in constant currency terms. They also projected adjusted EBITDA of around $1.14 billion and adjusted earnings of 5 cents per share.
Carnival raised its adjusted earnings projection for 2024 to $1.33 per share, from its previous forecast of $1.18 per share.
How shares responded: Carnival’s shares fell 0.3% to close at $18.48 on Monday, following the release of quarterly results. The stock has gained 13% over the past month.
What to watch: Investors will continue monitoring future bookings growth of the company, which are expected to provide a significant boost to its overall results ahead.
Other Markets: European indices closed lower on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 1.01%, 0.76%, 2.00% and 0.98%, respectively.
Russia has raised its defence budget by 23% for 2025 amid its ongoing war with Ukraine. The news sent the safe-haven US dollar index slightly lower in forex trading this morning.
Australia’s retail sales grew by 0.7% year-over-year in August, versus a 0.1% rise in the previous month. The latest reading topped market expectations of 0.4%, lending support to the AUD/USD forex pair.
The Philippines said its producer prices declined 1% year-over-year in August, after a 0.4% decline in the previous month, which sent the PHP/USD pair lower in forex trading this morning.
Thailand’s S&P Global manufacturing PMI declined to 50.4 in September, from 52.0 in the previous month, exerting pressure on the THB/USD forex pair.
Japan’s au Jibun Bank manufacturing PMI slipped to 49.7 in September, from 49.8 in the previous month. The latest reading represented the seventh straight month of contraction in the country’s manufacturing sector, which sent the JPY/USD pair lower in forex trading this morning.
Russia’s manufacturing PMI, Australia’s commodity prices, Turkey’s manufacturing PMI, Spain’s manufacturing PMI and new car sales, Italy’s manufacturing PMI, France’s manufacturing PMI, Germany’s manufacturing PMI, Eurozone’s manufacturing PMI and inflation rate, UK’s manufacturing PMI, South Africa’s manufacturing PMI, US Redbook index, S&P Global US manufacturing PMI, ISM manufacturing PMI, job openings, job quits, Dallas Fed services index, Dallas Fed services revenues index, Logistics Manager’s Index and API crude oil stocks change, Brazil’s manufacturing PMI, as well as Canada’s manufacturing PMI.
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