UK Housing Prices Add to Signs of a Struggling Economy
THE TAKEAWAY: UK house prices slide 0.7% in July, worse than expected -> House prices come as another sign of a struggling economy -> Pound trading steady in today’s session
UK house prices fell for the second month, down 0.7% (seasonally adjusted), according to the Nationwide Building Society. Housing prices were also down 2.6% from July 2011, marking the sharpest annual drop in 3 years. Both housing price declines were worse than expected.
The typical price for a UK home dipped to 164,389 Pounds in July, down from 165,738 during July of last year. Nationwide said in their release that a wetter month and an extra bank holiday during the quarter only partially account for the drop in prices.
The housing prices come as another sign of a struggling UK economy. Just yesterday, Moody’s lowered their growth forecast for the UK in 2012 to 0.4%. Nationwide Chief Economist Robert Gardner said, ‘the weaker price trend observed in recent quarters is unsurprising, given the disappointing performance of the wider economy.’
The BoE’s 80 billion Pound Funding for Lending Scheme opened today, seen as a program that could possibly increase credit and stimulate the British economy. The BoE said they will consider further monetary action, maybe even an additionalrate cut, based on the success of the lending program. Tomorrow, the central bank will decide August’s interest rates and asset purchase target; economists expect both to remain unchanged.
The British Pound did not significantly move against the US Dollar following the housing prices release and GBPUSD trades around 1.5670. The British Pound continues to trade within a month-long range below resistance near 1.5750. A pickup in volatility seems likely in the afternoon as the FOMC monetary policy announcement is unvailed amid widespread hopes for added stimulus
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