Does the UK housing market mirror Sterling?
The Halifax house price index showed monthly and annual increases of 1.4% and 10.2% yesterday which means the average house has gone up by £331 a week.
Alongside the house price survey is the Halifax Housing Market Confidence Tracker which showed that 71% of adults expect UK house prices to rise in the next 12 months and just 5% think they will fall. But price expectation evidently isn’t everything: only 47% of people think it would be a good idea to buy in the coming year while 57% reckon it would be a good time to sell.
Could the same logic be stalking Sterling? After all, a “good time to sell” is not when everybody else is scrambling to do so. A bad time to buy is when prices are outstripping demand. That seems to be the case in the real estate market, where the average house price has now risen to seven times the average annual salary. It could also be the case for Sterling.
With all the forecasts and surveys out there, yesterday morning was a reminder how difficult it can be to predict certain events. Australian employment was one such event as this morning’s figure, covering July, was expected to show 12,000 new jobs. The actual number was -300. That’s an error of 4100%. Inevitably the Aussie Dollar was sold off after the news, falling by more than a cent.
Yesterday’s the Canadian Dollar led the way, helped by a much bigger than expected trade surplus. Sterling on the other hand looked a bit shabby with only a 0.3% monthly rise in industrial and manufacturing output against expectations for a 0.6% rise.
It would be astonishing if the Bank of England’s policy announcement today were to be any different from those it has made for the last two years. The European Central Bank, too, is expected to keep its monetary stance unchanged. But beware the ECB press conference.
The ECB president may volunteer, or be asked for by journalists, the bank’s view on how Russian sanctions will affect the Eurozone economy. The assumption is that they will have a negative impact but if Sr. Draghi says their effect will be minimal the Euro could receive a boost.