GBP/USD: sterling sell-off accelerates as UK house prices jump

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on Jun 29, 2021
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  • The GBP/USD is on track for its worst weekly performance since September.
  • The pair declined even after the relatively strong housing and mortgage data from the UK.
  • Investors are worried about the impact of the lockdown.

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The British pound (GBP/USD) pair declined by more than 0.30% even after the relatively strong economic numbers from the UK. The pair fell to 1.3835, which is about 1.13% below the highest point last week.

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GBP/USD
GBP/USD price action

UK house prices rise

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The UK housing sector is red-hot as investors as demand continues to outpace supply. This is evidenced by the strong house price index (HPI) data published by the Nationwide Society.

The numbers showed that the average house price rosev by 29,000 pounds in the past 12 months. Precisely, the prices rose by 13.4% on a year-on-year basis. This was relatively smaller than the median estimate of 13.7%. It was also higher than the previous month’s increase of 10.9%.

This increase is mostly because of the historically low interest rates in the UK. the Bank of England has maintained rates at a record low of 0.10% to cushion the economy from the pandemic. Further, its 875 billion pound quantitative easing package has helped lower rates.

Further, UK house prices have risen because of the stamp duty holiday the government passed last year. Most importantly, the lockdown has helped more people save for their downpayment. 

The GBP/USD also reacted to the relatively strong borrowing data. According to the BOE, mortgage lending increased from more than 3.03 billion pounds to more than 6.85 billion. In the same period, the number of mortgage approvals increased from more than 86.90k in April to 87.55k. Net lending to individuals increased from more than 2.9 billion pounds to more than 6.9 billion pounds.

The GBP/USD is therefore on track to its worst monthly performance since September because of the rising number of coronavirus cases in the country. In its response, the government has delayed its reopening to July.

GBP/USD technical forecast

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GBP/USD
GBP/USD technical chart

The British pound has been in a sharp downward trend after it rose to a high of 1.400 last week. The pair has managed to move below the 25-day and 50-day exponential moving averages (EMA). It is also along the lower line of the Bollinger Bands while oscillators like the MACD and Relative Strength Index (RSI) have been in a sharp decline. Therefore, the path of least resistance for the pair is lower. This will likely see the pair drop to the next key support at 1.3785.

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