The GBPEUR exchange rate has seen one of its best days this year with a 0.78% gain in the morning session. Sterling has been boosted by the Conservative party’s election wins over the weekend that tightened the party’s control over England. The Scottish election result is also taking a back seat as traders see it being something to talk about further down the line and are focusing more on the growth outlook and reopening.
GBPEUR is trading at 1.1585 with UK house prices also hitting a record high this morning.
Election results reduce sterling risk factors
The pound v euro has been strong after the Conservative party tightened its grip over England, with a striking victory in Hartlepool being the highlight- the first time ever that it has swung to Tory control. The results reduce any fears of political uncertainty in the country and give the Tories a mandate to continue with their manifesto, while Labour retreat to lick their wounds and reconsider their own strategy.
The British pound has also been boosted by the Scottish National Party’s failure to win an overall majority in its own election last week. This has led to the belief among traders that won’t be a referendum in this parliament and they are seeing it as more of a longer-term issue.
Traders have unwound bearish bets and are now giving the pound credit after the Bank of England raised its growth forecast to 7.2% from its previous expectations of 5%. The bank is also tapering its QE programme hinting that the spending splurge is now over.
House prices at a record before Euro data
UK house prices have hit a record high in April, according to the latest data from the Halifax.
Russell Galley, managing director of the firm said: “House prices in April eclipsed the record high set the month before as the market continued to maintain its recent momentum. The average property is now worth £258,204, up 1.4% month on month and 8.2% annually, the highest annual growth rate in 5 years.”
The housing sector was boosted by the latest UK budget, with an extension of the stamp duty holiday deadline, and a new ‘help to buy’ scheme for those with a 5% deposit seeking to join the property ladder.
Many estate agents are said to be reporting that people are adjusting their housing requirements, with many seeking a home office, or larger garden as living habits change due to the lockdowns.
Mr Galley added: “There is growing optimism in the long-term outlook of the UK economy as the vaccination programme continues at pace, yet we remain cautious about the medium-term prospects of the housing market. As we said in March, the current levels of uncertainty and potential for higher unemployment as furlough support ends leads us to believe that house price growth will slow to the end of the year.”
GBPEUR has resistance above the 1.1600 level as it seeks to get back to the yearly highs at 1.1800.