UK housing woes mount, but BoE pause keeps Sterling supported
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Daily Currency Update
Sterling held steady around 1.3550 against the dollar after the RICS House Price Balance dropped to -19% in August, the weakest reading since January 2024. The data underscores ongoing stress in the UK housing market, with buyer enquiries and agreed sales also falling sharply. This reflects the drag from persistent inflation which came in at 3.8% in July, with the BoE expecting a 4% peak in September coupled with subdued growth expectations.Markets widely anticipate the Bank of England will keep rates on hold at 4% next week, adopting a cautious stance amid rising fiscal pressures ahead of Chancellor Rachel Reeves’ autumn budget. Whilst weak housing data typically weighs on sterling by signalling slower growth, the pound could still benefit if US inflation cools and the Fed cuts more aggressively, enhancing the UK’s relative yield appeal.
The BoE’s “wait-and-see” approach may offer some support to GBP/USD in the near term, but political and fiscal uncertainty could limit further gains. All eyes now turn to Friday’s UK GDP release, which is expected to show stagnation following June’s 0.4% expansion.
Key Movers
The dollar traded softer across major currencies, with USD/JPY slipping below 147.50 and the Dollar Index (DXY) hovering near 97.60. This weakness followed cooler-than-expected U.S. Producer Price Index (PPI) data, which reinforced expectations for a Federal Reserve rate cut at next week’s FOMC meeting. Headline PPI slowed to 2.6% YoY from 3.3%, while core eased to 2.8% from 3.7%. Markets now await today’s key CPI and Jobless Claims data at 13:30 UK time. Consensus expects CPI to rise to 2.9% YoY, with core steady at 3.1%. A soft print could solidify bets for three 25 bp cuts this year, while a stronger reading may revive speculation of a smaller easing cycle or even a larger 50 bp cut.Initial jobless claims are forecast at 235K, and while recent prints haven’t signalled recession, any surprise could shift market focus away from CPI. Political tensions also simmer after the assassination of conservative activist Charlie Kirk, though immediate dollar impact is limited.
Meanwhile, the EUR/USD climbed back above 1.1700 ahead of today’s ECB meeting. Rates are expected to remain unchanged at 2.15%, with attention on President Lagarde’s tone. A dovish message could weigh on EUR/USD, especially amid French political instability and global trade tensions. The near-term EUR outlook remains neutral to mildly bearish.
Expected Ranges
- GBP/USD: 1.3470 - 1.3575 ▼
- GBP/EUR: 1.1510 - 1.1605 ▲
- GBP/AUD: 2.0335 - 2.0600 ▼
- EUR/USD: 1.1610 - 1.1710 ▼