more gains ahead as UK home price index spikes

The GBP/USD price popped sharply on Tuesday as investors ignored the uproar about the Downing Street parties. The pakr rose to a high of 1.3500, which was the highest level since January 26th this year.

UK home prices surging 

The housing sector in the UK has been significantly strong in the past few months and the trend is not slowing down.

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According to the Nationwide Society, the country’s home price index (HPI) rose by 11.2% in January after rising by 10.4% in the previous month. That growth was bigger than the median estimate of 10.8%. It was also the best start of the year since January 2005.

Home prices in the UK and other developed countries like the US, Australia, and New Zealand have jumped sharply during the pandemic. 

There are three main reasons for this. First, in the UK, the government encouraged homeownership by providing a stamp duty waiver during the pandemic. Second, interest rates have been at record lows. And finally, inventories in the housing market has been limited. 

Therefore, the GBP/USD pair rose because analysts expect that the Bank of England (BOE) will sound hawkish when it delivers its interest rate decision on Thursday. These rates will be important since the bank is attempting to prevent a housing bubble. 

The GBP/USD rose after the damning report by Susan Gray on Downing Street parties. The report accused the Prime Minister of holding parties in a period when the country was in a lockdown. Still, analysts believe that the report will not have a major impact on the economy. 

Meanwhile, the manufacturing sector was relatively strong in January even as the country battled the Omicron variant. According to Markit, the country’s manufacturing PMI was 56.9 in January. A PMI figure of 50 and above is usually a positive thing. 

GBP/USD forecast 

The four-hour chart shows that the GBP/USD pair declined sharply in January as American bond yields rose and as tensions about Ukraine eased. 

The pair is now attempting to pare back those losses. It has already moved above the 25-day and 50-day moving averages. It hss risen above the 50% Fibonacci retracement level and is approaching the first support of the Andrew’s Pitchfork tool. 

Therefore, the pair will likely keep rising in the near term as investors target the next key resistance at 1.3550.

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