Pound (GBP) Soft, Although House Price Slowdown Eases Bubble Fears
UK house prices have risen slower-than-expected in January, increasing 4.4% year-on-year (YoY) compared to the forecast 4.7%, a ten basis point drop on last month’s figures. Seasonally adjusted house prices rose just 0.3% month-on-month, half the rate predicted. Despite softening bubble fears, Pound Sterling is trending in the negative region against the majority of currencies.
The Euro is also experiencing mixed fortunes, even though the GfK Consumer Confidence Survey held steady at 9.4, against predictions of a drop to 9.2. The willingness to buy index has risen to its highest level in six months. Both currencies are likely weakened by the fact that European stock markets have opened lower after a -0.5% loss in Shanghai during the Asian session.
US Data Glut Begins Positively
The first pieces of today’s US data glut have printed mostly positively. The House Price Index held steady at 0.5% month-on-month (MoM), while the Case-Shiller Composite-20 increase 5.83% instead of the 5.69% forecast. The US Home Price Index rose from 5.06% to 5.35% year-on-year (YoY). While the Markit PMIs have performed negatively, the Consumer Confidence index saw a larger-than-expected rise, hitting 98.1 instead of 96.5.
Pound Sterling (GBP) exchange rates are trending down today thanks to a dire warning from Credit Suisse regarding the threat of a ‘Brexit’ to the UK economy. A confident defence of quantitative easing from Mario Draghi has helped push the Euro (EUR) up. The US Dollar (USD) is performing well overall, although the argument over just how strong the US economy really is continues to provide a weakening effect.
GBP/EUR Exchange Rate Forecast: Credit Suisse Reveal Dovish Prediction for Post-EU Britain
The UK could suffer a simultaneous financial and economic shock in the event of a ‘Yes’ vote during the in-out referendum on EU membership. That’s the claim by one Swiss bank, which has issued a catastrophic prediction of how the UK might be affected by a split from the European Union.
According to Sonali Punhani and Neville Hill, both fixed-income research analysts for Credit Suisse, ‘In its most extreme that could mean a level drop in GDP of 1% to 2% in the short term due to the toxic blend of depressed business confidence, tightening financial conditions, higher inflation and falling real incomes. In the medium term, we expect it to be negative for UK demand and supply, implying a weaker GDP growth path.’
The markets might also be in bear-mode because Mark Carney is appearing before the Treasury Committee to discuss the UK’s financial stability. He has already refused to rule out the possibility of him taking the full 8-year term as Bank of England (BoE) Governor and agreed that the interest rate hike by the Federal Reserve in December was a contributing factor to the turmoil in the global financial markets.
Carney’s speech will continue to move the GBP/EUR exchange rate today, while there is no Eurozone data due out to provide pressure.
GBP/USD Exchange Rate Soft: US Dollar Advances Ahead of Data Glut
The US Dollar has put on a mixed performance overall so far today as investors await a slew of US data, including the influential Consumer Confidence survey results. House price data and Markit PMIs are also scheduled for release during today’s European session, giving traders plenty of direction in the wake of rising speculation that the US economy is not as strong as previously thought. An interest rate hike by the Federal Reserve in December was seen as a clear signal that US economic recovery was strong, however since the turbulent start to 2016 that strength has been the subject of much debate.
A new survey by the National Association of Business Economics has found that a quarter of economists anticipate growth to be below 2% over the coming year, the highest level of dovishness in three years. More than half of respondents believe sales will slow in the next three months, while the wage and salary index saw a strong rise.
Another data slew for the US follows tomorrow, with the next interest rate decision being announced towards the end of the European session.
Latest GBP, EUR, USD Exchange Rates
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading around 1.3094, while the Euro to Pound Sterling (EUR/GBP) exchange rate is trending in the region of 0.7636.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trading around 1.4192, while the US Dollar to Pound Sterling (USD/GBP) exchange rate is trending in the region of 0.7045.