Currency Note

Average asking price for UK homes falls 1.9% in August

By Roseanne Bradley August 21st, 2023

The Halifax House Price Index reported the biggest decrease in UK house prices since August 2009

The pound soared to a five-week high against the euro late last week and remains close to said high this morning. The pound is up close to 1% on the week and 1.3% up on the month.

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A poll from Reuters on Friday showed that 99 out of 110 economists expect the Federal Reserve to keep US interest rates unchanged in its September meeting. After the poll, the US dollar weakened slightly but quickly regained its strength.

Also on Friday, economists heard UK retail sales data fell 1.2% in July and this sent the GBP/USD rate into negative territory. Compared to this time last week, the pound is up 0.23% against the US dollar.

The anticipation for the Bank of England (BoE) to raise interest rates in its next meeting remains high however, the fear of a sharp rate hike by the BoE could add pressure to sterling as investors worry it might negatively impact the economy.

British home construction company, Crest Nicholson reported profits are down 14.4% and it’s on track for its biggest daily drop in over six weeks. Share prices of UK house builders have tumbled following this announcement.

Further woe for UK home sellers comes from Rightmove, which revealed that the average UK home has been listed for £364,895 throughout August. This is 1.9% lower than a month ago but steeper than the average 0.9% drop and marks the fasted monthly decline since June 2018.

Producer prices in Germany declined by 6.0% year-on-year in July, from a 0.1% rise in June, while pointing to the first decline since November 2020. This drop was largely due to a base effect, which came in worse than market expectations of a 5.1% fall amid a 19.3% tumble in energy prices.

On the data front, today and tomorrow are relatively quiet but on Wednesday, we’ll receive German Manufacturing PMI figures. Conditions are believed to have improved from July’s reading of 38,.8, the lowest since May 2020, and economists expect an increase to 41 in August.

We’ll also receive the flash Manufacturing PMI figure for the UK on Wednesday which is expected to fall slightly from 45.3 to 45.2.

On Thursday, the spotlight will be on US durable goods orders. More on that below. Then on Friday, economists will receive the latest German Ifo business climate index reading, which previously fell for the third consecutive month in July.

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GBP: Soft retail sales report

The pound edged lower against the euro on Friday as UK retail sales reports fell short of market expectations. It’s believed rainy weather and high prices weighed on consumer spending.

GBP/USD: the past year

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EUR: German business climate appears glum

On Friday this week, economists will receive the latest figures that represent the German business climate. It’s forecast to decline for the fourth month in a row to 86.9 in August from 87.3 in July.

USD: A slow month for durable goods

It’s a quiet one for US data this week however, on Thursday US durable goods order figures are expected to reflect a 0.5% increase in July, from a 4.7% jump in June.

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