Sterling Stumbles Following Soft Housing Price Data

Sterling moved lower on Friday following in line GDP data and housing price inflation that was softer than expected. With inflation continuing to provide a relatively tame backdrop, the Bank of England might have time before it needs to pull the trigger on higher interest rates.

UK house price inflation was softer than expected according to November data from Nationwide, which reports prices rose by 3.7% year over year, down from 3.9% year over year in October. The market median had been for a 4.2% rise. Price increases have oscillated between 3% and 4% year over year over the past six months, which have been “broadly consistent” with earnings, by the estimates of Nationwide, though the lender still points to a “dearth” of supply. Strong BBA mortgage approvals data this week suggests that the demand side of the equation will remain strong in the months ahead.

Cable dropped to support near the November lows at 1.5020. Resistance on the currency pair is seen near the 20-day moving average at 1.5199. Momentum is negative with the MACD (moving average convergence divergence) index printing in the red with a downward sloping trajectory.

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