A rush by home-buyers to beat an end-of-June deadline for a tax break and a shortage of properties on the market helped to push a measure of British house prices to its highest level since 1988 in May, a survey showed on Thursday. “With the economy performing better than could have been expected even a short while ago and the cost of money still at rock bottom levels, the principal drivers supporting demand will remain in place even after the expiry of the stamp duty holiday,” RICS chief economist Simon Rubinsohn said.

British finance minister Rishi Sunak, seeking to soften the COVID-19 hit to the economy, last year exempted the first 500,000 pounds ($707,500) of property purchases in England or Northern Ireland from the stamp duty tax. In March he extended the incentive until the end of June after which there will be a 250,000 pound tax-free allowance until the end of September. Bank of England Chief Economist Andy Haldane said on Tuesday that Britain’s housing market was “on fire” which would probably aggravate wealth inequalities in the country. Deputy Governor Dave Ramsden has said there was a “risk that demand gets ahead of supply and that will lead to a more generalised pick-up in inflationary pressure.”

Among them, The Times update over the last-ditched efforts to resolve the Northern Ireland (NI) issue by UK Brexit Minister David Frost and European Commission vice-president Maros Sefcovic gained major attention. “The Brexit minister Lord Frost today said there had been “no breakthroughs” with the EU after “frank and honest” discussions about the Northern Ireland impasse, including policies on sausages and chilled meats,” said The Times.

On the other hand, the combination of factors weighs on the sterling’s performance. The growing tensions between UK and EU, as the two sides failed to reach an agreement on implementing the Northern Ireland Protocol, impact the sterling negatively. The British Prime Minister Boris Johnson is considering all options amid an emerging trade war after Brussels threatens to impose sanctions over the UK’s exports to NI. It’s worth noting that the upbeat comments from BOE’s Chief Economist Andy Haldane couldn’t win over the bears discussing a third covid wave in the UK, backed by comments from UK epidemiologist Neil Ferguson the previous day.

GBP/USD 4 Hour Chart:

Support: 1.4085 (S1), 1.4058 (S2), 1.4006 (S3).

Resistance: 1.4164 (R1), 1.4216 (R2), 1.4243 (R3).

Amid all the recent catalysts, we expect a bearish trend for GBPUSD.