Rightmove House Price (MoM) (FEB) (19:01 GMT)
Expected: -
Previous: -0.8%

Rightmove House Price (YoY) (FEB) (4Q) (19:01 GMT)
Expected: -
Previous: 3.4%

What Are The Markets Facing?

House price values have been on a long-term decline in UK, contributing to a decline in net worth and dampening consumer sentiment for the past six months. Last week the number of residential property agents and surveyors saying prices fell exceeded those reporting gains by 54.7 percentage points, the worst in 15 years. The RICS result matched the lowest value since May 2003 and if the Rightmove data confirms the RICS results cable could see more selling as traders anticipate further rate cuts from the BoE.

Bank of England policy makers cut the benchmark interest rate for the second time in three months last week as the property market's weakness threatened to exacerbate the economic slowdown. Banks have also curbed lending, stifling demand from home buyers in need of credit and preventing consumers from adding to their record debt. If demand for UK housing continues to decline, BoE may be forced to act more aggressively in months to come.

Bonds – Long Gilt Futures

The BoE hawkish tone, after its last rate cut, has weighed on the Gilt. The MPC has focused on inflation, signaling future rate cuts are further off than anticipated. Despite its recent decline, the contract has found trendline support as indicated by the doji candle around 109. Look for the Gilt to rally off of this support if the slumping UK housing market continues to show signs of deterioration, as risk adverse traders will try and find shelter. Conversely, if the housing market shows sign of recovering, then the contract may break through trendline support and fall towards 108, as it would allow the BoE to continue its hawkish stance.

FX – GBP/USD

The long bear rally for the GBP/USD may be over after forming a double bottom at the 1.94 handle. After the pair sold off going into the last BoE rate decision, a short covering rally was fueled by the Monetary Policy Committee’s recent hawkish tone. In its latest quarterly inflation report Governor Mervyn King reiterated that inflation was a concern and would prevent the bank from slashing rates aggressively. However, the short term price action has seen the pound selloff as traders fear that recent strong labor data may not be telling the complete picture as UK consumers recorded the second highest amount of credit card charges in December. If the Rightmove house prices confirm the recent RICS survey which reported housing prices fell for the sixth straight month, we may see a continued selloff of the Pound. If there are signs that prices are stabilizing, investors may feel that the total UK economic picture may not be as bad as the story coming from across the pound, and restore price action in the pounds favor.

Equities – FTSE 100 Index

The FTSE 100 Index had been trading around the 5,700 support level, as investors were uninspired by the BoE’s recent quarter point rate cut. That was until Warren Buffet’s recent proposal to supposedly bailout troubled US monoline insurers, sparked a rally across U.S. and U.K. equities. Unfortunately, the proposal was prematurely celebrated, since it appears that the venerable investor was only looking to cherry pick from the portfolio’s and leave insurers with a balance sheet of worthless paper. The market was directionless as investors tried to digest the merits of Buffets proposal, the strong labor numbers and the hawkish tone that came from the BoE. That was until Fed chairman Ben Bernanke’s warning of further deterioration in the U.S economy – which the U.K. has been lagging - brought risk aversion back into the market. Any disappointing data from the U.K. will only feed into this bearish sentiment and push the index toward support levels, which is expected from the upcoming Rightmove house price survey. However, if the housing market shows sign of stabilizing it may bring enough relief to investors to spark an equities rally.

Terri Belkas is a Currency Strategist at FXCM.