British Pound Rises to Highest Level in Two Months on Strong Housing Market

The British pound rose to the highest level against the US dollar in more than two months on Thursday, as home prices rose more than expected in the United Kingdom. The British currency also touched its best level against the euro in a month following disappointing inflation data in the European Union.

The Nationwide Building Society released a report earlier today that stated that the house price index rose 0.1% on a monthly basis in November to hit an annual growth rate of 2.5%. The index maintained the same annual growth rate from October, which was the best rate since August. Meanwhile, analysts expected the index to rise to 2.7%, with a 0.2% monthly increase.

The report added that the average home price was 209,988 British pounds, to stay close to the highest average home price in record, which was 211,495 British pounds. Home prices remained relatively high as supply shortage persisted, which stretched affordability in major cities in the United Kingdom.

Construction of new properties remained too low, however, converting larger homes into multiple units and offices into flats helped supply. While new constructions were 13% lower in 2017 from a decade ago, the increase in dwellings was 22% from the 2007 peak.

The British pound gained more ground against the euro in the wake of a lower than expected reading for the consumer price index of the European Union. Eurostat, the official statistical office of the region, said in a data release today that the inflate rate within the euro zone was at 1.5% in November at an annualized rate, up from 1.4% in October. The increase still missed estimates of a gain to 1.6%.

GBP/USD rose to 1.3486 at 14:50 GMT on Thursday after reaching 1.3490 at 14:40 GMT, the pair’s highest level since September 25. GBP/USD started trading today at 1.3415. EUR/GBP was at 0.8819 after touching 0.8777 at 10:05 GMT, a level last seen on November 2. EUR/GBP began the day at 0.8832.

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