UK average house prices fall, German inflation data eagerly awaited
It’s a data heavy day on the economic calendar, with many potentially market moving risk events taking place.
This morning saw UK House Price data released at 7am. The outcome suggested that annual house price growth has moved into negative territory for the first time since June 2020. The average price of a home declined by 1.1% year-on-year to £257,406 in February, the weakest rate since November 2012. In January, the annual rate showed 1.1% growth.
Prices fell 0.5% compared with January, following a 0.6% drop the month before. It was the sixth monthly decline in a row, and left prices 3.7% below their peak in August.
The recent run of weak house price data began with the financial market turbulence in response to the mini-Budget at the end of September last year. While financial market conditions normalised some time ago, housing market activity has remained subdued. This likely reflects the lingering impact on confidence as well as the cumulative impact of the financial pressures that have been weighing on households for some time.
The GBP had a strong day yesterday, with sentiment surrounding the pound recovering from its lowest levels since September to end February with a gain against the euro and dollar, and March could see further gains according to certain tier 1 analysts.
The GBP/EUR rate approached the key 1.11 support level in the wake of the February 02 Bank of England decision but was back at 1.14 at the start of March, amidst improved domestic data and an agreement between the EU and UK on the Northern Ireland Protocol.
Since then we have come off slightly, with a host of EU PMI data and lacklustre UK House Price data sending the GBP down versus the EUR, and we currently trade around 1.1345.
GBP/USD has remained relatively resilient this morning, extending the rebound toward 1.2100 in early European trade on Wednesday. A recovery in risk sentiment on upbeat Chinese PMIs is helping the pound following the Brexit deal optimism. The US Dollar turns south ahead of the ISM PMI data. Next on the economic calendar is Andrew Bailey's speech at 10:10am.
EUR/USD is advancing toward 1.0650, extending the upside in the European session. The pair is benefiting from the hawkish ECB expectations and a broad US Dollar weakness. All eyes remain on German inflation and US PMIs which are in the limelight this afternoon.
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