Market Report - 07/07/2023
UK house prices fall at fastest rate since 2011; Attention turns to Non farm payroll
Halifax reported this morning that the UK house prices fell at the fastest annual rate for 12 years, this June as interest rate rises cool the market.
The latest report on the UK housing market displayed an average price of a home sold in June fell by 2.6% YOY, which is the lowest since 2011. This is the second consecutive month that prices have dropped, where a 1.1% drop in the year to May was reported last month. On a monthly basis the overall average house price had dipped just by 0.1% bringing the new average to £285,932.
The South of England remains the area where house prices are facing the most downward pressure. At -3.0%, the annual fall in the South East was the largest since July 2011, knocking the average price down to £384,106.
Despite this dip reported in June, the average house price is still higher by 1.5% for 2023 so far, however, most of that growth came in the first 3 months of year before the disastrous mini budget. Meanwhile, the average price of new build property prices rose by 1.9% in the year to June – stronger than the wider market, but the slowest rate in over three years.
In the equities market, the FTSE 100 fell to its lowest closing level in 2023 as interest rate fears continue to strike fear in the markets.
With the UK government borrowing costs rising, extending an increase seen in recent weeks amid concern that the B.O.E may even need to engineer the conditions and force a recession, with the hopes it would squeeze high inflation out. This morning the FTSE opened 0.4% lower after yesterday’s selloff, down 26 points, it has touched 7,232 points this morning, the lowest intraday level since March, when the panic in the banking sector triggered losses.
In the US, the Non-farm payrolls move into focus today as data is released at 12:30 GMT. Yesterdays ADP figures surprised as the private sector added 497k jobs in June, nearly double expectations. Following this data we saw the USD strengthen across the board, with GBP/USD trading 0.6% lower from open. There has been a slight resurgence during early morning trade on Friday, with the cable rate sitting comfortably above 1.2715.
Now all eyes are on the NFP which has consistently surpassed expectations this year, with a noticeable upward trend over the past three months. The forecast for June has been set at 225k, however If the upcoming report exceed those expectations, it is likely that market participants will adjust their expectations for Federal Reserve rate hikes upward.
Lastly, GBP/EUR has remained relatively supported around the 1.17 level, predominantly due to a lack of EU economic data for the remainder of the week. Expectations of further BoE rate hikes and the possibility of the ECB curving rates by Q4 has lead the GBP remaining comfortable versus the EUR, sitting near the 12 month high which was noted a fortnight ago.