UK house prices down 5.3% on year

According to Nationwide, UK house prices fell by 5.3% in the year to September; the largest drop since 2009. Surely no one can be surprised that 14 interest rate hikes after more than a decade of virtually 0% interest rates would have a negative impact on the housing market. Hence, although sterling slipped on the last day of the week, the month and the quarter on Friday, it has recovered a little this morning. The recovery is muted but GBP/EUR is up to €1.1550 and GBP/USD is up half a cent to $1.2210. We lack UK data this week but we’ll get plenty from the EU and US to keep things bubbling along. 

AUD and NZD poised for ‘on hold’ interest rate calls

We will have interest rate decisions from the Reserve Bank of Australia and the Reserve Bank of New Zealand this week. The RBNZ raised their base rate from 0.25% to 5.5% over nearly 2 years before pausing for the last 3 meetings. The RBA base rate was 0.1% in May 2022 and has been held at 4.1% for the last 3 meetings. Yes, there is a pattern. We expect that pattern to continue when both central banks meet this week. ‘On Hold’ decisions are expected from both as they try to assess whether they have managed to counter inflation without crushing recovery. It is such a knife-edge call but inflation tends to correct itself as it is a 12-month moving average. So natural balance should help their cause. Sterling’s little recovery this morning has brought GBP/AUD  up to AUD 1.9020 and GBP/NZD up to NZD 2.0340 but both rates seem to have run out of upward oomph for now.

USD weaker as government faces shutdown

Every so often, The US government faces a shutdown because of their inability to agree an ongoing budget and/or debt ceiling. Whether it’s a political tactic or just ineptitude is a point for debate, but we are in that position again as budget talks have stalled. Oddly, anything that appears sacrosanct to the US president is financial support for Ukraine. Others are more concerned with major failings in parts of the US. For now, the GBP/USD rate has recovered a little to $1.2210 and the EUR/USD rate is a cent higher than Thursday’s lows. That pair is at $1.0580 this morning. Aside from the politics, we will see a number of purchasing managers indices from the US this week and Friday will bring the September employment report. So there are plenty of reasons for the dollar to be volatile this week.