UK House Price Growth Accelerates in December
Low trading volumes and lack of significant macroeconomic data continue to remain the highlight of the final week of this year. The UK docket this week has only one data in the form of the latest survey by building society Nationwide which came out earlier today. The survey indicated that average house prices in the UK grew more than expected in December, slightly triggering concerns that property could become unaffordable in the near future.
Looking towards Europe, the EU measure of inflation in Spain unexpectedly dipped lower from a year ago in December. Across the Atlantic, pending home sales figures for the prior month due later in the day will provide more insights about the US residential market.
Pound Sterling – UK Markets
Earlier in the day, the Pound managed to recover some of its lost ground against the US Dollar after falling back to the lowest level since April yesterday. Sterling – US Dollar currency pair is currently trading above the 1.48 mark amid thin volumes and as a mixed greenback against the major currencies has lend a hand to the much needed pullback in the Pound. However, as the week moves along into the New Year, the Pound could remain under pressure in the face of differing central banks’ monetary policy outlook particularly after one of the Bank of England’s (BoE) most hawkish policymakers in the previous week hinted that he might not be too eager to vote for higher interest rates in the near term. The BoE voting member Martin Weale stated that subdued wage growth and further slide in commodity prices off late have made the case of an imminent BoE rate rise weak.
On the macro front, this week’s only UK data update by the Nationwide revealed that house prices in the nation continued to gain strength in December.
US Dollar – US Markets
The US Dollar edged higher against most of the major currencies yesterday after the Conference Board in its survey showed an improvement in consumer morale of the current situation in the US economy encouraged by robust labour market, lower gasoline prices and rising house prices in the US and spurring hopes that the economy will carry this momentum into 2016. Also, a report by S&P/Case-Shiller showed that home prices in the major US metropolitan areas grew at a faster than anticipated rate for October.
Sentiment for the greenback is largely subdued against the Euro, while against the Japanese Yen it is trading almost flat this morning. In the meantime, investors seemed to have moved past yesterday’s US economic numbers and now look forward to pending home sales data, which could add to gains in the US Dollar against the majors in the session ahead. Expectations are for the pace of pending home sales to have increased in November, given favourable fundamentals such as improving labour market, wage growth and low borrowing rates which could be helpful for continued recovery in the US housing sector.
Euro – European Markets
The Euro – US Dollar currency pair continues to trade above the 1.09 mark as New Year Holiday looms, however gains will be limited as trading is expected to remain subdued for the remainder of the week, with little second-tier economic data scheduled both in Europe and the US. As for today, market participants earlier witnessed the release of inflation and current account data in Spain. The harmonised measure of Spain’s consumer prices continued to remain in deflationary territory in December. The economic data, however, had limited influence on trading in the Euro against its key peers. Additionally, data which came out a little while ago showed that Italy’s producer prices stayed in negative territory, thus indicating lack of price pressures in the nation’s economy.
Going forward, the Euro will continue to remain under pressure against the greenback, primarily due to the heightened prospects of further tightening of the US monetary policy and ECB’s determination to implement further easing moves to spur growth in the moribund Euro zone economy.
Other Currencies – Highlights
The Kiwi Dollar slipped from an 11-week high after the previous extensive rally against the US Dollar earlier today. The losses in the New Zealand Dollar against the greenback were partly attributed to the renewed slide in oil prices this morning. At the moment, the New Zealand currency is seen resuming its upward momentum against the US Dollar as the nation stands out in the world when it comes to its appealing official cash rate of 2.5%. However, going forward, the Kiwi Dollar could be pressured again on rate differentials from both the sides, as the Federal Reserve raises its key interest rate and the Reserve Bank of New Zealand eases further in the upcoming New Year.
The other key event for the Kiwi Dollar will be the Global Dairy Trade (GDT) auction which is scheduled in the first week of January. Lately, the news has been fairly upbeat for the New Zealand currency as the last two biweekly GDT auctions showed a rise in dairy prices after three consecutive declines in prices through October and November.