The pound is trending lower against the US dollar and many of its other peers this morning as markets react to the UK’s latest house price index. According to data published by Halifax, average house prices in the UK contracted 1.4 per cent in November, well short of the 0.5 per cent rise that had been forecast by markets. Year-on-year this left growth at just 0.3 per cent, a new six-year low. Analysts are blaming the slowdown on limited inventory and the struggle for first time buyers to get on the property ladder.
Russell Galley, Managing Director at Halifax said: “High employment, wage growth and historically low mortgage rates continue to make home ownership more affordable for many, though the need to raise a significant deposit still acts as something of a restraint on the market.
“This is largely offset by relatively limited supply of new and existing properties for sale, which continues to sustain house prices nationally.”
At the same time the US dollar is struggling in wider currency markets this morning amid speculation that following an expected hike this month the Federal Reserve could hold time on further hikes in 2019.
This comes as the Wall Street Journal reports that Fed policymakers are debating whether to adopt a “wait-and-see” approach to rate hikes in this month’s forward guidance.
It follows recent remarks by Fed Chair Jerome Powell that he believed US interest rates were nearing “neutral levels”.
Markets had previously forecast that the Fed would maintain its current pace of hikes through to the next year, leading to up to three hikes in 2019, so talk of a pause will come as a major blow to US dollar investors.
Coming up later today is the publication of the latest US non-farm payrolls report, which could see the pound US dollar exchange rate begin to creep higher this afternoon if the sharp slowdown seen in the ADP employment release yesterday is reflected in today’s data.
Meanwhile movement in the pound is likely to remain limited over the next couple of days as investors brace for the upcoming parliamentary vote on Theresa May’s Brexit deal and the potential fallout if MPs reject the deal, as is widely expected.