Sentiment toward UK assets has improved, helped by a range of
anecdotal and high frequency data that suggest the near-term hit to the
UK economy may have been less than many feared. These have centred on
retail spending, tourism and manufacturing orders. The news on housing
has been less positive. Mortgage approvals for house purchases were
weaker last week and there are reports of reduced asking prices and weak
activity. The sector is also slowing following a front loading of
purchases ahead of changes to buy-to-let and stamp-duty.
believe that the impact of the Brexit vote will be a slow-burn as a
combination of weaker investment and real incomes growth on higher
inflation is gradually felt. Political noise may rise on
Parliament’s return on September 5th. We may get more on the timing of
Article 50 and priorities for fiscal policy at the Autumn Statement.
We maintain our negative bias while spot is below 1.35 and expect resistance at 1.3372.