The Pound Sterling?s upward trajectory continues

The pound continues to reinforce itself at the upper end of recent trading ranges, improving on its multi-year highs against a number of currencies like the US, Australian and Canadian dollars and multi-month highs against a range of currencies like the New Zealand dollar and the euro.

The pound was given a further boost yesterday by a report from the Nationwide that UK house prices rose at the fastest pace in more than three years in November with prices jumping by 6.5% year-on-year, compared to the rise of 5.8% reported in October.

The price rise reported for this month seems to vindicate Bank of England (BoE) Governor Mark Carney’s view that house prices are continuing to accelerate sufficiently for the BoE to start to scale back their Funding for Lending Scheme.

Instead, the BoE is going refocus the scheme, which has until now helped to increase mortgage lending to both home-buyers and businesses to instead focus solely on helping small firms that find it hard to borrow. Carney and the BoE clearly feel that the property market has picked up enough for such a move.

Nationwide's chief economist, Robert Gardner commented that "A large part of the improvement can be attributed to further improvements in the labour market and the brighter economic outlook. Policy measures aimed at keeping down the cost and improving the availability of credit are also playing an important role".

Meanwhile, Chief UK and European Economist at IHS Global Insight, Howard Archer, said the robust rise in house prices will fuel concern that the UK was headed for a new housing bubble.

Archer expects to see another marked rise in December and an increase of around 8% in 2014 driven mostly by London and parts of the South East.

Archer commented that “While the strength of house price rises in London is becoming an increasing concern and pushing up the overall national increase in house prices, we are currently some way off from an overall housing market bubble emerging. Nevertheless, there remains a very real danger that house prices could really take off over the coming months, especially if already significantly improving housing market activity and rising buyer interest is lifted appreciably further by the Help to Buy mortgage guarantee scheme which was launched in October.”

Elsewhere, further bad news for the euro zone with yet another sign of struggling domestic demand in Germany as October retail sales data registered an unexpected decline of 0.8% on the month, despite September's figure being revised up to a 0.2% decline from the 0.4% drop originally reported.

On the year, retail sales fell 0.2%, when consensus had expected a 1.3% increase.

Meanwhile, worldwide stock markets continue to rise raising risk appetite with the Tokyo exchange hitting a 6 year high; the Hong Kong exchange hitting a 3 year high and the New York exchange an all-time high yesterday.