The pound gave up some of its recent gains against the euro at the end of the trading week last week after the European Central Bank upgraded the growth prospects for the single currency in 2014.
In a quiet news day yesterday, it found some support on the news from the Halifax that UK house prices rose by 1.1% in November and were up by 7.7 per cent on the same period in 2012.
The Halifax cited lower borrowing costs and higher consumer confidence as the main reasons behind the rise in addition to the government schemes including ‘Help to Buy’ and ‘Funding for Lending’ which have helped.
Housing economist Martin Ellis was quick to point out that UK house prices and sales remain below the levels reached at the height of the last housing market cycle in 2006/2007.
The euro was hit on Monday on the news that industrial production in Germany registered a surprise drop in October although the Ministry of Economy forecasts an expansion in the coming months.
The German Economy Ministry admitted that it has been a “weak start” to the fourth quarter of the year but noted that industry orders continued their upward trend and sentiment indicators signalled a growing confidence in the German economy, the largest in the euro zone.
Meanwhile, for the second month in a row, the US economy expanded the rate at which jobs are being created by a bigger margin that analysts had expected with US non-farm payrolls expanding by 203,000 in November according to the Bureau of Labour Statistics (BLS) compared to a consensus estimate for a rise of just 185,000.
Consequently, the US unemployment rate dropped from 7.3% to 7% in November.
In a note to clients, analysts at Capital Economics commented that "The 203,000 increase in November's non-farm payrolls, along with the drop in the unemployment rate to a five-year low of 7.0 per cent, gives the Fed all the evidence it needs to begin tapering its asset purchases at the next FOMC meeting later this month". Despite this, the US dollar failed to benefit from the better than expected data as the majority of analysts still believe that it will March at the earliest before the US Federal Reserve start to taper its $85 billion a month support program.