GBP: Brexit Anxieties and Falling UK House Price Growth Pressure Pound
Whilst yesterday was predominantly a quiet day for UK data, the year-on-year Halifax house price index demonstrated a fall in UK house prices.
Annual house price growth steadied to its lowest rate in some four years, falling from 2.6% previously to 2.1%, slightly lower than the forecast of 2.2%.
The Managing Director of Halifax Community Bank, Russell Galley, stated:
‘House prices continue to remain broadly flat, as they have since the start of the year’.
The primary cause of the slowdown cited was lacklustre wage growth, which has been squeezing spending power and thus limiting the rise of prices.
Beyond this, continued Brexit stagnation also hurt Sterling against the majors, as various senior ex diplomats asserted that the cabinet was ‘split’ on the significant issues of the debate.
GBP EUR: Pound Euro Touches New Seven-Year-Low
The Pound to Euro exchange rate continued to slide yesterday – reaching a fresh seven-year-low.
This was despite the release of some disappointing German industrial production data, which came in significantly below expectations; dropping from 1.2% to 1.1% (below forecast of 0.2%).
The Pound’s inability to capitalise on a seemingly vulnerable Euro was due to a fresh bout of gloomy Brexit news and the aforementioned drop in UK house prices.
As of this morning this pairing has steadied somewhat, however, as Germany has received a fresh bout of disappointing data prints. Although the nation’s trade surplus widened, Germany recorded a dramatic decline in both imports and exports.
As there are no significant UK data releases today the Pound’s ability to claw back some gains against the Euro will mostly be dependent on the sentiment surrounding today’s political manoeuvrings.
GBP USD: Pound US Dollar Steady with both Nations Experiencing Political Pressures
The Pound to US Dollar exchange rate has remained steady after last week’s Bank of England (BoE) induced plummet and news of Brexit-based political instability.
The US Dollar has been soaring after the recent run of positive jobs data. This has now slowed however due to concerns regarding the current political situation between the US and China – particularly regarding future trade relations.
US President Donald Trump has put into motion an intellectual property (IP) investigation into Chinese goods in the latest in a string of attempts to pressurise China into reigning in its southern neighbour North Korea.
The possibility that US – China trade relations may become strained has been enough to drive some demand away from the ‘Greenback’, but markets are also anxious about how Friday’s US inflation figures will perform, anxieties that have caused some bearishness within the pairing.
GBP CAD: Pound Canadian Dollar Flat on Quiet Data Calendar
The Pound to Canadian Dollar exchange rate has remained predominantly flat this week, with very little reason for investors to buy into the Pound thus far.
This may, however, change on Thursday when the UK data calendar picks up, especially with the release of the UK’s total trade balance, construction output, manufacturing production, and industrial production figures.
Currently the trade deficit is forecast to drop from -£3073 to -£2,500, should this occur then Sterling may find room to push back against the ‘Loonie’ Dollar.
On the Canadian front, investors will be looking to the latest commodity news and indeed this week’s significant Canadian data releases.
Opec is due to hold a meeting this week and any news that it may be moving towards increasing production cuts will likely give the oil-correlated ‘Loonie’ a boost.
Additionally, Wednesday and Thursday will see the release of various housing statistics.
GBP AUD: Pound Sterling Australian Dollar Limited by Brexit Negotiations
The Pound has been limited in its movement against the Australian Dollar this week as discussions regarding the Brexit divorce have failed to progress.
Downing Street recently dismissed rumours of a 40BN Euro figure, though markets still remain mostly in the dark as talks continue.
Sir Simon Fraser, previous Chief Mandarin for the foreign office until 2015, recently stated that discussions had not ‘started well’.
Fraser asserted that differences within the cabinet and the fact that they had not yet been resolved were slowing proceedings, news that drove demand further away from Sterling.
Australia itself has had some good news, however, with the AiG performance of construction index for July expressing a big leap from 56 previously to 60.5. In addition, the nation’s NAB business confidence survey leapt from 8 previously to 12 for July. This news, however positive, has been somewhat negated by the recent dovish trend of the Reserve Bank of Australia (RBA), limiting AUD gains.
GBP NZD: Pound New Zealand Dollar sees small gains as New Zealand two-year Inflation Expectations Drop
The Pound to New Zealand Dollar exchange rate climbed yesterday after the release of New Zealand’s business expectations for consumer price inflation over the next two years.
Businesses predicted that inflation would drop to 2.1%, down from 2.2%, a prediction that drove demand away from the ‘Kiwi’, especially with tomorrow being the highly significant Reserve Bank of New Zealand’s August monetary policy decision.
Should the meeting tomorrow prove dovish, then Sterling will likely climb even further against the New Zealand Dollar.