GBP/USD advances after HBOS Housing Prices report

The sterling advanced against the US dollar, after the HBOS reported its Housing Prices index, amid growing inflationary expectations.

GBP/USD reached a session high at 1.6360 at 10:21 GMT, gaining 0.21% for the day, having hit on Monday 1.6442, the highest level in 27 months. Support was likely to be received at December 5th low, 1.6301, while resistance was to be encountered at December 5th high, 1.6404.

On Friday, the Halifax Bank of Scotland (HBOS) released a report, showing that House Prices in UK increased at a faster-than-projected pace in November. House Prices rose by 1.1%, which exceeded the projected 0.8% pace and slightly lower in comparison with previous month upwardly revised increase of 1.3%. UK house prices rose for a 10th consecutive month in November. HBOS clarified the main reason was the supply of properties for sale was insufficient to keep up with the pace of the demand. HBOS is the biggest mortgage lender in Great Britain and regularly conducts a wide-range survey on the real estate sector, part of which is the HBOS House Prices indicator, which provides information about prices of houses, based on which mortgages were lent.

According to the mortgage unit of Lloyds Banking Group Plcs statement made in London today, UK home values increased 1.1 percent to an average 174,910 pounds ($285,800). In the three months through November prices were up by 2.1%.

Another report by the same bank revealed UK house prices rose by 7.7% in November compared to the same month a year earlier, the fastest annual increase in six years.

Martin Ellis, a housing economist at Halifax, said in a statement, cited by Bloomberg, “Stronger demand, combined with an insufficient increase in housing supply, has resulted in increases in house prices accompanying higher activity, however pressure on consumer finances will remain a constraint on the rate of growth of house prices.”

Last week, BoE attempted to restrain the strengthening British property market by ending incentives for mortgage lending under its credit-boosting program. Before the decision was made, BoE boosted the housing demand by its Funding and Lending Scheme, combined with the UK government Help to Buy program, which aimed to help buyers with small deposits.

A survey on UK Consumer Inflationary Expectations during the three months ended September 2013, showed that inflationary expectations increased to 3.6% , compared to the previous reading of 3.2%. Inflation Expectations measure the percentage, at which consumers expect the price of goods and services will change during the next 12 months. The indicator is based on a survey of about 2 000 consumers on a quarterly basis and is made in co-operation between The Bank of England and GfK. The released figures supported the sterling.

On Thursday, the Monetary Policy Committee, decided to keep the pace of its monthly asset purchases unchanged at 375 billion pounds. The Monetary Policy Committee consists of 9 members, 5 of which are from BoE and 4 are outside experts, which are appointed by the present BoE’s Governor, Mark Carney. The asset-purchasing program was pledged to remain unchanged until unemployment, currently at 7.6 percent, falls below 7 percent. The Committee announced that it will keep the benchmark interest rate at the record low of 0.5%. The decisions were in line with expectations and confirmed the stance from bank’s last policy meeting on November 7th.

Meanwhile, yesterday US revealed much-better-than-expected economic data. The US Commerce Department reported the nation’s revised Gross Domestic Product grew at a 3.6% annualized rate in the third quarter, up from the initial estimate of 2.8% and the strongest since Q1 of 2012, beating analysts’ projections for a 3.1% expansion. According to the report, US growth was mainly driven by the largest increase in inventories since early 1998. Inventories increased at a $116.5 billion annualized pace in Q3, compared to $86 billion rate the preceding quarter.

A separate report, provided by the Labor Department, showed that the number of people who filed for initial unemployment benefits sharply dropped in the week ended November 30th. Initial Jobless Claims declined to 298 000 last week, compared to an upward revision of 321 000 claims in the preceding week, confounding analysts’ expectations for a jump to 325 000.

Yesterday’s jobless claims, coupled with better-than-expected employment data on Wednesday, fueled speculations we might get upbeat readings today when the Labor Department will release November’s keenly awaited non-farm payrolls and unemployment rate. Automatic Data Processing Inc. reported on Wednesday that U.S. private employers added 215 000 jobs last month, the biggest increase in a year, confounding analysts projections for a decline to 170 000. October’s reading received an upward revision to 184 000 from initially estimated at 130 000, suggesting the US economy fared better than economists thought in October.

Today’s reports may show that US employers added 180 000 jobs in November, while the unemployment rate slid back to a five-year low of 7.2%. If confirmed, this would further boost demand prospects, but gains are expected to remain limited as the readings would also reinforce speculations for an earlier-than-expected tapering of Fed’s monetary stimulus.

Elsewhere, AUD/USD slipped to a session low at 0.9036 at 1:04 GMT, after which consolidation followed at 0.9050, down 0.14% for the day. Support was likely to be received at December 5th low, 0.9004, while resistance was to be met at December 5th high, 0.9076.