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Housing market pain points


Housing market pain points

The Pound was relatively flat last week against a host of other currency majors, but maintained its title of one of the best-performing G10 currencies relative to the US Dollar. As we come to the close of the year, talk now turns to the last central bank meetings of 2022. It's largely expected that the Bank of England will make its last 0.50% interest rate hike in December, as data shows signs of cooling inflation. In UK property news, mortgage approvals have dropped by 20% in the last two months, and house prices have fallen at the fastest pace since June 2020. According to Nationwide, prices declined by 1.4% between October and November, the quickest tumble since the 2008 Global Financial Crisis (excluding the lockdown fall in the early part of 2020). In the week ahead, further housing market data releases will be revealed, and Consumer Inflation Expectations will be out on Friday, giving some indication of household sentiment on prices in the year ahead. 


A change in optimism 

The Euro has been standing its ground versus the US Dollar in recent trading as optimism in the Euro increases. In central bank news, some European Central Bank policymakers have suggested gradual rate rises are needed after inflation data didn't come in as high as expected. It takes some time for the effects of rate rises to filter through to the economy, and if inflation is beginning to cool, more rate hikes may just inflict further pain on households. In the week ahead, Eurogroup meetings will take place in which Eurozone Finance Ministers coordinate economic policy. Some German data will also be released, and ECB President Christine Lagarde will also speak.


Moderation on the way

The Dollar has noted some losses in the last several weeks as risk sentiment ebbs. However, the Dollar experienced a short-lived boost following solid employment data on Friday. A robust labour market shows that the economy is doing well in the face of higher interest rates. However, Federal Reserve Chair Jerome Powell has said, 'the time for moderating the pace of rate increases may come as soon as the December meeting,' which could mean the upcoming monetary policy meeting is an interesting one. In the week ahead, confidence data will be released, as well as services data and some labour market stats. 


RBA surprise ahead?  

The Aussie and Kiwi Dollars made some ground against the US Dollar last week as the US currency weakened. In the week ahead, one of the most significant events for the Australian Dollar will likely be the Reserve Bank of Australia's interest rate decision announced on Tuesday. Markets anticipate an increase from 2.85% to 3.10%, and any deviation from that could impact the Aussie trades. RBA policymakers have surprised markets on three of its ten monetary policy meeting announcements this year, and there's the possibility the central bank may announce a smaller-than-anticipated hike. Another impactful market event could be Wednesday's Aussie growth numbers, which are forecast to come in at 6.3% on the year—an increase from the 3.6% recorded in Q2. It's a quieter week in New Zealand, with only Electronic Retail Card Spending worth noting, leaving the Kiwi Dollar susceptible to geopolitical events and wider market developments. 


Tumbling on the economic outlook

The Canadian Dollar tumbled versus the US Dollar last week, reaching the lowest levels seen in a month at some points as it was pressured lower with concerns that the Canadian economy is faltering. In banking news, HSBC also announced it would be selling its Canadian unit to the Royal Bank of Canada. Meanwhile, crude oil, Canada's most lucrative commodity, was trading at below $80 per barrel as OPEC rumours around maintaining current supply levels made their way around the market. In the week ahead, the Bank of Canada will announce its latest interest rate decision, with estimates for an increase from 3.75% to 4.25%  

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