Pound soft after four-year low for UK house price growth

In another sign that the UK economy is weakening, house prices grew at the slowest pace since August 2013 last month, according to data from Halifax published yesterday.

GBP/EUR is trending at €1.1042 and GBP/USD at US$1.3035. GBP/AUD is stuck at AU$1.6466, GBP/NZD at NZ$1.7721 and GBP/CAD has dipped to CA$1.6507. These are all close to the pound’s opening levels for the day.

There’s not much left on the calendar to keep the pound on the move today. Is this morning’s movement a sign of a slow day?

What’s been happening?

The pound softened yesterday after data released by Halifax showed that house price growth in the UK has slowed to its weakest rate in four years. Property prices increased 2.1% on the year, but in the three months to July were -0.2% lower than the three month period to April.

That marks the fourth quarter in a row in which house prices have declined on the previous three months. Consumers won’t make big purchases if they aren’t confident in the health of the economy, so a fourth consecutive quarter of declining house prices has economists worried.

Eurozone data wasn’t positive either, but GBP/EUR still weakened. German industrial production posted a shock decline on the month of -1.1% - a slowdown from 1.2% growth to 0.2% had been predicted.

Additionally, the Sentix investor confidence index for the Eurozone weakened from 28.3 to a three-month low of 27.7.

However, because Friday’s US jobs data caused the euro to plummet, there was room for EUR to recover and this drove it higher, with markets ignoring the domestic data.

A speech from Federal Reserve official James Bullard mid-afternoon undermined the US dollar’s strength to some degree. Bullard continued his cautious streak, commenting that soft inflation warranted keeping rates on hold during the near-term.

What's coming up?

There is no UK data left for release today, leaving the pound to react to the results of the midnight data released by the British Retail Consortium (BRC).

The German trade and current account balances have just been published, so the EUR will likely spend the day reacting to those. Signs of a surplus in Germany often causes tension with other member states, who accuse the Eurozone’s powerhouse economy of hoarding its windfalls rather than investing them in ways that would boost exports in other currency bloc economies.

This could allow GBP/EUR to make gains.

There is no impactful US data on the calendar, so GBP/USD could rise as markets digest yesterday’s comments from Bullard and Kashkari.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.