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Euro Pound (EUR GBP) Climbs Ever Higher as UK House Prices Disappoint

  • Euro Pound Climbs to 0.9302 – Pound Euro Slides to 1.0748
  • UK House Price Figures Drop Unexpectedly – Pound Hamstrung
  • Michel Barnier Lambastes Brexit Progress – Negotiations Continue to Stagnate

The Euro Pound exchange rate soared this morning after the UK’s house price figures disappointed and Brexit frustrations continued.

Year-on-year Nationwide housing prices dropped unexpectedly from 2.9% to 2.1% in August, significantly below the forecast of 2.6%. Similarly, the month-on-month figure fell from 0.2% in July to -0.1% in August, missing the 0.2% mark. This was a three-month low for UK house price growth, and a result that underlines the continued pinch that high inflation and low wage growth is having on consumer appetite.

Chief Economist at Nationwide, Robert Gardner, stated:

‘The slowdown in house price growth to the 2-3 per cent range in recent months from the 4-5 per cent prevailing in 2016 is consistent with signs of cooling in the housing market and the wider economy’.

Indeed, the Nationwide house price figures are a reliable gauge for the cost of homes within the UK and thus, a gauge for the state of the UK economy as a whole. The market reaction to this news was immediate, with demand for Sterling tumbling.

Next Phase of UK Brexit Negotiations Disappoint, Sterling (GBP) Suffers

The next phase of Brexit negotiations kicked off on a somewhat of a sour note this week as the European Union’s chief negotiator Michel Barnier stated that he was ‘concerned’ with the amount of progress so far.

His primary contention was that the UK’s stance was too ambiguous, and that elements of the ‘divorce’ must first be solved before talks could begin on other aspects of Brexit (like trade).

The assertion that the divorce bill and movement rights must first be sorted before talks can progress has been the stance of the EU commission for some time, and comes at odds with London’s position that trade talks should take place in conjunction.

UK Brexit Secretary David Davis has called for both sides to show ‘flexibility and imagination’, but reports are that the briefings have only continued to present stagnation, as well as ‘a good deal of mutual exasperation’.

The Euro has continued to capitalise on this news today, climbing against Sterling on an otherwise quiet data day for both nations.

Euro Pound Forecast: Continued Euro (EUR) Strength Expected

Currently the Euro to Pound exchange rate forecast remains predominantly positive. Germany, the largest economy within the Eurozone, will publish its inflation figures tomorrow, which are expected to present a small increase from 1.7% to 1.8% in August (year-on-year).

Thursday will also feature a run of important Eurozone releases, starting with German retail sales for July (expected to jump massively), German unemployment figures, and the Eurozone’s inflation figures as a whole, also expected to increase.

The data calendar for Sterling is mostly sparse this week, though Tuesday will feature July’s net consumer credit figures, as well as mortgage approval numbers.

With the majority of the Eurozone’s data prints forecast to be positive, the outlook for this pairing remains steeped in favour of the Euro, though this could change if significant progress is made towards Brexit and if the situation with North Korea worsens.