U.K. house prices rose 0.9% m/m in June, another surprising rise after May's 1.3% increase (revised from 1.2%) and compared to our survey median estimate for an unchanged monthly rate. The y/y reading improved to -9.3% from -11.3%. Overall, data hence continue to suggest that we are seeing some stabilisation of house prices, though we still think it's all too early to talk about a market recovery, and still expect to see monthly declines in the second half of the year, as unemployment, weak consumer confidence and continued tight credit will keep a lid of house prices. Also note that we few transactions taking place, house price data is now based on a far smaller number of transactions that a year ago, distorting price comparison.
Cable traded at fresh trend highs above 1.6700 amid reports of early Middle Eastern buying and mooted Eastern European reserve diversification. Offers at 1.6600-20 were taken out and very large stops above 1.6640 and 1.6700 to see 1.6744 trade. Also aiding the GBP upturn was fresh positive leads on the U.K. economy after U.K. Nationwide house prices picked up 0.9% in June and the U.K. GfK consumer confidence rose to -25 in June from -27 in May. EUR-GBP traded in to 0.8450 in the wake of the Cable rally and the June 22 six month low of 0.8400 is a potential target in the near-term. Elsewhere, there may be some GBP demand to go through for today's London fix after U.K. stocks fell 2.7% in June, but overall month end related flows are expected to be lower than in recent months.
