GBP: UK house prices remain buoyant, but 2017 brings uncertainty

On a light day of data for the UK it is worth noting that the Nationwide house price index gave some insight for 2017 and reflection of 2016. On the annualised basis average house prices have increased by 4.5 percent, which is the same rate as 2015 despite the now infamous Brexit. The report went on to say that it believes the UK will see a “modestly slower” increase next year as the economy weakens. They have stated that growth of 2.0 percent is more likely than a decline.

Meanwhile, sterling (pound, GBP) remains on the back foot despite retracing some of yesterday’s losses. Political uncertainty continues to circle the airwaves and with the Supreme Court ruling on Brexit expected to be revealed in January, this is not going away anytime soon. Should the Supreme Court rule in the Government’s favour, Prime Minister Theresa May can proceed with her plans to invoke Article 50 by the end of March, without seeking parliamentary approval. If the Supreme Court does not rule in favour of the Government, the High Court ruling will stay in place and parliament will get to vote on the legislation, which could delay Article 50. Until this is resolved, sterling remains vulnerable.

As we enter the final trading day of the week we won’t see any significant data from the UK. It has been a tough year for sterling in 2016, but this could only be the kindling to stoke the fires for 2017. As already highlighted, political uncertainty remains the key factor in play, not just for the UK but also for Europe and the US as we seem to be entering the dawn of a new era. If you are setting budget rates in January for 2017, give us a call to discuss these and the hedging tools available to protect against the uncertainty of the currency markets.