The BOE (Bank of England) has turned hawkish lately. Inflation picked up considerably in the UK, so the rate hike votes increased to 3 and the rhetoric from Mark Carney sounded sort of hawkish.
The funny thing is that the UK economic data used to be neutral or slightly positive until that BOE meeting, but since then, the data has turned sour, really sour.
We saw some signs of weakness in the last couple of weeks but today is a totally different story. Let's start with the first release.
The Halifax house price index showed a 1% decline. House prices have been absolutely surging in the past 5 years or so, particularly in the southeast of the country. When you see house prices fall, then there is something wrong with the economy.
Construction output also declined by 1.2% this month, so the whole picture of the housing market is complete and it looks gloomy.
Manufacturing and industrial production also declined, while the trade deficit increased. So, all the numbers from the UK are red on the calendar, not just missing on expectations, but turning down big time, particularly the housing sector.
The GBP/USD dived about 50 pips to 1.2910s but it has stalled. To me, this is a big bearish turnaround; the BOE can wave goodbye to any monetary tightening, but the market seems too slow to realize it. So, we've turned bearish for this forex pair as well.
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