GBP/USD Drops, Hovers at 1.2833 Amid House Price Release

The British pound saw a small amount wiped off its value in the foreign exchange markets on Tuesday and into Wednesday in its pair against the greenback. It was seen at 1.2833 one stage, a position it reached after pulling back in its dollar pair. A decline of nearly a fifth of a percentage point was noted. Part of this was down to the US presidential election debate. The vote, which is scheduled to take place in November, appears unpredictable – and if Tuesday’s debate is anything to go by, the campaign’s apparent nastiness could be about spook investors further.

Several factors, including switchovers on the Supreme Court and the rhetoric of President Donald Trump in relation to mailed-in ballots, have been pointed to by analysts as signs that there may be a protracted post-election clash if the result is disputed. A move towards the perceived safety of the greenback, which can be easily traded in for ready cash, was not surprising in this context. However, there were also domestic factors at play in the UK. House prices in the country were revealed to have started rising again. According to one set of figures released by the lender and bank Nationwide, house prices were up 5% year on year in the last month. This surprised analysts, and went ahead of the predicted rate of 4.5%. However, it also beat the levels seen the month before – of 3.7%. The British government has instituted a reduction in the amount of stamp duty, or tax, that those purchasing a house have to pay. This is understood to have stimulated demand for property in the country.

The wider economic picture for the UK, however, remains uncertain – which could be a further reason why sterling traders were holding off making large moves to buy. One of the latest quarter-on-quarter figures for reductions in the size of the country’s gross domestic product in Q2 2020 now sits at 19.8%. Senior figures at the Bank of England have suggested that further economic declines could be on the way. On the dollar side, the US features heavily on the economic calendar in the coming days, with the country’s economy expected to be squarely in the spotlight. Thursday will see a personal incomes figure for August released from the US at 12:30pm GMT. Month on month, this looks set to be disappointing, with a change from 0.4% to -2.4% expected.

Initial jobless claims for last week will also be out in that time slot. This, however, is expected to show a slightly more upbeat perspective – with the figure expected to change from 870,000 to 850,000, meaning that fewer people are claiming out-of-work benefits. A similar decline is expected for the continuing jobless claims figure for the previous week. This will be out in the same time slot.

Nigel Frith

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