Pound – opening UK, Brexit, bonds, house prices

Doubts about the British government’s plan to reopen the economy on June 21 in light of the expansion of the so-called Delta variant proved to be one of the key factors that undermined the pound during the first half of European trade action.

In addition, indications that Britain’s relationship with the European Union is a bit strained put additional pressure on the GBP/USD pair. Ahead of Brexit talks on the Northern Ireland Protocol later this week, the EU ambassador to the UK said on Sunday that the level of trust between the two powers is very low. While investors watched last mixed U.S. monthly job report, the dollar found some support for U.S. Treasury Secretary Janet Yellen’s comments over the weekend, saying higher interest rates would be a plus for the Fed.

Weaker NFP reports eased market expectations that the Fed would begin reducing asset purchases sooner rather than later. Janet Yellen’s remarks re-ignited the talks amid concerns over rising inflationary pressures, which in turn acted as the last wind for U.S. bond yields.

House prices in the UK rose the fastest so far in almost seven years in May, driven by the easing of national locking restrictions and the gradual reopening of the housing market, data from Lloyd’s Bank Halifax and IHS Markit showed this morning.

House prices rose 9.5 percent year-on-year in May, after 8.2 percent in April. But this was slower than the 10 percent increase expected by economists. On a monthly basis, house price growth fell to 1.3 percent in May from 1.5 percent in April. Economists predicted that prices would rise by 1.2 percent. With growing confidence in the recovery of economic activity, if restrictions continue to ease, these trends are likely to support house prices for some time to come, especially given the persistent shortage of real estate for sale, Gallei added.