With trading volumes sharply down with New York closed due to Martin Luther King day, the pound slipped to a new 10 month low against the euro after further forecast at the weekend that the UK faces a ‘triple-dip’ recession.
In the only UK data out yesterday, the Centre for Economics and Business Research (CEBR) reported that UK house prices look set to surpass their 2007 pre-crisis peak in 2014 and also predict that a typical house in the UK will cost almost 20% more by 2018.
The report claims average UK house prices will reach £223,000 by 2014, 7 years after hitting this level as the economy makes a "fitful return to health".
The CEBR also expect the Bank of England (BoE) to expand its quantitative easing (QE) programme from its £375 billion level today to £450 billion by late 2013.
Property website Rightmove also reported a positive view of the market in its report published yesterday noting that the number of properties coming to market is up 22% year-on-year at the start of 2013, while it has seen traffic on its site up by 27% in the same period.
Meanwhile, a report in the Daily Telegraph shows that the UK has overtaken France to become Germany’s biggest global trade partner for the first time in the modern era, solidifying the emergence of a “special relationship” between Europe’s two like-minded northern powers. Data from Germany’s central Bank, the Bundesbank show that Anglo-German trade in goods and services soared to €153 billion in the first nine months of 2012 with both exports and imports booming at double-digit rates.
At yesterday evening’s meeting, the euro zone finance ministers elected Dutchman Jeroen Dijsselbloem to replace Jean-Claude Juncker as Eurogroup president.
The choice was not unexpected, but neither was it unanimous. According to news reports, Spanish economy minister Luis de Guindos objected to the appointment because he felt that his country “doesn’t have the representation it deserves” at the European Union (EU) level.
In addition, the Bundesbank believes that the country's economic weakness will be short-lived suggesting that the German economy may have already reached bottom after the 0.5% contraction registered in the fourth and last quarter of 2012.
Overnight, the Bank of Japan (BoJ) has moved to open-ended monetary easing and has yielded to the government’s call for a higher, harder target for inflation, in its strongest show of commitment to ending years of deflation. The BoJ said it would aim to achieve a rate of 2% inflation, up from its current goal of 1% “at the earliest possible time” by shifting to the kind of limitless stimulus embraced by the US Federal Reserve. From January 2014, its current Y101 trillion round of asset-purchases had been set to expire, the bank will begin buying Y13 trillion of mostly short-term government debt each month until that inflation target has been met.