GBP/USD Extends Losses After Weak Housing Data

09/07/2023

1 minute read

2023.09.07 16:16

MarketPulse

British Pound falls to 3-month low against US Dollar
UK house prices fall sharply
BoE’s Bailey is non-committal about the September rate decision

The British Pound has extended its losses on Thursday against the . In the North American session, is trading at 1.2472, down 0.28%. Earlier, the Pound touched a low of 1.2445, its lowest level since June 8th.

The Pound has been unable to find its footing and has posted five losing sessions in the past six, falling 250 basis points during that span.

UK Housing Data Disappoints

UK house prices continue to fall and posted a decline of 1.9% in August, the steepest drop since November 2022, according to the Halifax Bank of Scotland. The Halifax report noted that house prices have been resilient this year in the face of rising interest rates, but the lag effect of rate hikes may be making itself felt through higher mortgage costs.

This week’s UK PMI releases highlighted the weakness of the UK economy and have pushed the wobbly Pound lower. The Services PMI for August was revised higher to 49.5 from 48.7, following a July reading of 51.5 points. This marked the first decline in services business activity since January. This was followed by the Construction PMI, which decelerated and barely remained in expansion territory at 50.8, down from 51.7 in July. The manufacturing sector has been woeful, and last week’s PMI dipped to 43.0 in August, down from 45.3 in July.

With the struggling UK economy as the background, Governor Bailey said on Wednesday that it was “much nearer” to ending the current tightening cycle, but added that the BoE might have to raise rates further due to persistently high inflation. Bailey remained non-committal about the September 21st meeting, but the markets are confident that the Bank will deliver a quarter-point hike, with a probability of 82%.