10/04/2018 - UK House Prices Rise by More than Expected in Q1

GBP

The British pound rose against a mostly firmer dollar on Monday and was on track for a third consecutive day of gains as investors were encouraged by data showing British house prices rising more than expected in March.

Since Britain signed a transition agreement last month to cover the 21-month period after it leaves the European Union, concerns about Brexit have decreased as investors focus on the state of the UK economy before an expected interest rate rise in May.

Yesterday mortgage lender Halifax said that house prices rose by a stronger-than-expected 2.7 percent in the first three months of 2018. The data is likely to bolster expectations that the Bank of England will raise rates next month by a quarter percentage point and reduce fears among investors that Britain’s economy is too weak to stomach a second hike later in 2018.

However, house prices are still rising much more slowly than before the 2016 referendum decision to take Britain out of the European Union which hit confidence among many households as the pound’s fall pushed up inflation.

USD

The dollar rose against its rivals on Monday, extending a two-week run, as investors unwound some short dollar bets on worries an escalating trade conflict between the United States and China may trigger buying of dollar assets.

Most of its gains were chalked up against the Asian currencies with the Chinese yuan holding near the day’s lows against the greenback after a media report that China was evaluating the potential impact of a gradual yuan depreciation as a tool in the escalating trade dispute.

The dollar rose 0.2 percent against its peers extending earlier gains - over a two-week period it is up nearly 1.5 percent. It rose about 0.2 percent against the Japanese yen. Trade war concerns have prompted investors to trim their record bearish bets against the greenback, with latest positioning data showing that net short bets against the dollar have fallen for the second week.

EUR

The euro was broadly stable despite two latest survey points that added to the latest bunch of lacklustre headlines from the euro zone. 

German exports plunged unexpectedly in February, posting their biggest monthly drop for more than two years while a survey showed that investor morale in the euro zone deteriorated for the third month in April.

Overall long euro positions have been broadly unchanged and are holding near record highs though this week might see a change in positions with the ECB minutes of its last policy meeting due on Thursday.

Key Announcements

13.30 – USD – PPI MoM; Forecast at 0.1% against previous of 0.2%