The GBP EUR exchange rate held gains above the 1.1900 level on Tuesday after Nationwide house price data came in near expectations. The 11% annual price increase was still a gain on the month; higher interest rates have not yet punctured the uptrend. Spanish unemployment made surprise gains in European data.
The GBP to EUR traded 1.1930 level. It could test 1.2000 with this support.
Nationwide, house prices are still shrugging off inflation pressures
UK house prices rose again to 11% in July despite the pressures on households from interest rates and higher energy prices.
The annual figure rose 0.3% from the 10.7% reading in June, with the average cost of a UK home hitting a new record of over £271,000. House prices in Britain also increased by 0.1% month-on-month, which was the 12th consecutive monthly increase, according to the Building Society.
Inflation is currently at a 40-year high of 9.4%. Record low consumer confidence led to a slowdown in mortgage transactions managed by Nationwide.
According to Nationwide chief economist Robert Gardner, the housing market maintained a unexpected momentum in respect to the growing pressure on household budgets from surging inflation and plummeting consumer confidence. He added that while there are “tentative” indications of a slowdown in activity with a fall in mortgage approvals for house purchases in June, this has not fed through to price growth yet.
Housing transactions in the three months to May were 20% below the levels seen during the stamp duty holiday. Analysts still expect a slowdown from household spending pressures in the coming months.
Germany argues over final nuclear plants
German policymakers are at loggerheads over whether the country should wind down its last three nuclear power plants as planned at the end of 2022.
Russian gas supplies dwindled to 20% of normal levels. As a result, the country desperately needs an alternative supply. There looks to be the potential for an extension after the Economy Ministry announced a new “stress test” in July for electricity supplies. A previous May test found adequate supplies, but the picture has changed again.
As Dutch benchmark gas futures near their yearly highs, the country needs to ensure they can keep gas flowing in the coming winter months.
“The European gas situation is quickly moving from our ‘bad’ to our ‘ugly’ scenario in the past month,” Bank of America said.
“With Nord Stream 1 pipeline flows at 20% of capacity, storage builds into winter could be insufficient, and the EU is now planning for widespread demand rationing. How did this happen?” they added.
“As pessimism on Russian supplies grows, European nat gas spot and forward prices are settling into a higher range.”.
Tomorrow will see trade balance figures for the German economy with yet another low anticipated of 523 million. Compared to the surplus of 17.9 billion a year ago, this figure was significantly down. Thursday will have the BoE interest rate and policy meeting.
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