More Central Bank cuts; UK house prices fall

Summary:

• 3 more CBs cut rates

• Largest move seen in NZD; AUDNZD rallies to resistance

• UK house prices fall again 

No fewer than three central banks have seemingly succeeded where their more recognisable peers at the Fed and ECB failed recently, in delivering a more dovish than expected message on monetary policy. The Reserve Bank of New Zealand cut the base rate by 50 bps (0.5%) to its lowest ever level at 1.0% in a move that surprised markets and sent the Kiwi dollar tumbling by almost 3% to trade at levels not seen since the start of 2016. Elsewhere the Indian and Thai central banks have also caught traders off guard with bigger than expected cuts of 35 bps (0.35%) and 25 bps (0.25%) respectively with the latter’s decision the first such move in 4 years. The Thai Baht has dropped in response although the Rupee is little changed on the day.

The AUDNZD has bounced strongly after the surprise RBNZ move with price now testing a confluence of resistance from the falling trend channel as well as the 38.2-41.4% fib retracement around 1.0450-1.0465. Source: xStation 

The decisive actions from this trio are symbolic of an ever more apparent trend from central banks, who are clearly looking to ease policy, in a bid to counter a global slowdown in activity that threatens to accelerate given the escalating trade tensions between the world’s two largest economies. Quite incredibly by the end of next year the Fed are now expected by traders to cut rates by more than 100 bps (1.0%) from their current level and its pretty obvious that the markets aren’t buying Chair Powell’s line that the recent cut was simply a mid cycle adjustment. 

UK house prices fall again 

For the second month in a row the price of property in the UK has declined as economic uncertainty continues to weigh on the market. According to Halifax, house prices fell by 0.2% month-on-month after a 0.4% drop in June - having said that though, values are still more than 4% higher than they were a year ago. Given the ongoing Brexit shenanigans it is hardly surprising that there’s been some softness in the area but it’s worth pointing out that these sort of short term fluctuations are fairly regular and in themselves shouldn’t be read into too much. The Elephant in the room remains Brexit and until there’s greater clarity on this front don’t expect any large and sustained moves in the property market.  

Shares in Barratt Developments, one of the UK’s largest housebuilders remain well supported with the stock still above pre-Brexit referendum levels. Source: xStation