GBP/EUR has fallen -0.2 per cent to €1.105 after a monthly survey of house prices conducted by Halifax shows that prices grew 2.1 per cent year-on-year in the three months to July.
This is the weakest rate of growth since April 2013 on an annualised basis, while compared to the February-April period prices were -0.2 per cent lower.
House prices have now declined for four consecutive quarters, causing alarm amongst economists who believe this may be a sign the UK economy is slowing.
Halifax Community Bank Managing Director Russell Galley said” “Improvement in the jobs market has not, as yet, boosted wage growth, resulting in earnings rising at a slower rate than consumer prices.”
“This squeeze on spending power, together with the impact on property transactions of the stamp duty changes in 2016 now being realised, along with affordability concerns, appear to have contributed to weaker housing demand.”
Markets are also concerned by data released by Visa showing that UK spending on clothes, cars and foreign holidays fell again for the third month in a row; the longest slump seen since February 2013.
According to Visa, spending fell -0.8 per cent year-on-year after dropping -0.2 per cent in June, although this was a minor improvement upon May’s -0.9 per cent drop.
The questions this morning’s data raises over the health of the UK economy is keeping the GBP/EUR exchange rate on the decline, despite Eurozone data also disappointing forecasts.
Germany has today reported the biggest decline in industrial production for a year, surprising economists who had bet on a slowdown in output from 1.2 per cent to 0.2 per cent on the month.
Instead, production declined by a seasonally-adjusted -1.1 per cent in June, with year-on-year growth dropping from 4.8 per cent to 2.4 per cent.
Economists have been quick to point out that this may simply be a blip rather than the beginning of a downtrend; industrial production is still up 1.8 per cent on the previous quarter, leaving the German economy in a strong position overall.
Eurozone Sentix investor confidence figures have also proven underwhelming; although printing at 27.7 instead of the forecast 27.6 for August, this is still a decline from July’s 28.3.
No UK or Eurozone data is scheduled for release for the remainder of the day, but US developments could threaten to alter the balance of risks for GBP/EUR later.
Federal Reserve officials James Bullard and Neel Kashkari are due to make speeches at separate events this afternoon and this evening respectively.
Both are cautious on the need for additional interest rate hikes, with Kashkari one of the most dovish members of the Federal Open Market Committee (FOMC).
Odds of an interest rate hike in December have weakened since Friday’s strong jobs data, with markets currently placing odds of just 50.4 per cent on the FOMC voting for further tightening.
These could fall lower after Bullard and Kashkari have had their say, pushing the euro higher to the detriment of the pound.