The GBP could not muster massive momentum on Friday. That comes as the recent housing price stats confirmed declines for a 4th successive month. The living cost crisis and increasing interest rates continue to hurt demand and slow the market substantially.
Following November’s 2.4%, the recent 1.5% dip brought the year’s growth rate lower to 2%. Nonetheless, 2022 proved a shaky year, with house prices soaring extremely during 2022 first half before plateauing over the summer. The drastic mini-budget sent tremors in the overall market, wilting the housing sector and skyrocketing mortgage rates.
Halifax Mortgages Director Kim Kinnaird stated that the broad economic environment would continue to impact the housing sector in 2023, with sellers and buyers adopting a cautious stance. That would trigger reductions in demand and supply, and predictions suggest a nearly 8% house price decline through this year.
The distressing news about construction activity’s sharpest dip since COVID highs also weighed on the Sterling. Like the housing sector, the building market has received a massive blow due to the surging interest rates.
New orders and activity fell and witnessed the construction PMI dipping from November’s 50.4 to 48.8. Chartered Institute of Procurement and Supply’s Dr. John Glen stated that the construction business deteriorated in December amid the sharpest dip in activity since May 2022.
He added that house building witnessed notable directional changes, with increased inflation for transportation and raw materials plus the squeeze on mortgage rates affordability, which led to declined house sales.
Upbeat Labor Market Supports USD
Meanwhile, the United States dollar extended its new year celebrations as the resilient labor market propped it up. Thursday’s massive employment data allowed market participants to take comfort in the expectation of more Fed rate hikes.
The ADP published monthly employment change numbers, which witnessed private sector employment surge by 235,000 versus the expected 150,000. With the anticipated labor market figures on Friday, the US dollar might soar higher if data surpasses the forecast again. Continued labor market resilience might bolster Federal hikes. Remember, the central bank perceives a robust labor market can shoulder inflationary pressures.
GBP-USD Exchange Rate Prediction – Employment Data to Strengthen the Greenback?
The GBP-USD exchange rate may witness more daylight after the unemployment data and non-farm payrolls. Anticipations of a 200,000 increase in NFPs plus an untampered 3.7% unemployment rate might bolster the United States dollar.
Even so, sterling fans have little to celebrate as an absence of economic data will expose the Pound to varying domestic headwinds. Moreover, the living cost crisis and escalated industrial action might ensure a massive cap on the sterling.
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