The UK property market cooled significantly in March, hit by economic uncertainty stemming from the war in Iran. Data released on Thursday by the Royal Institution of Chartered Surveyors (RICS) showed that the net balance for house prices fell from a revised -14 in February to -23 in March, marking the sharpest decline since January 2024. Both new buyer demand and sales expectations softened significantly, with the net balance for price expectations over the next three months plummeting from -19 to -43, the lowest level since August 2023. Overall, the UK housing market has entered a short-term adjustment phase, with prices and transaction volumes weakening in tandem, shifting from cautious improvement to stagnation and weakness. Future trends will depend heavily on whether geopolitical tensions ease, whether energy prices fall, and changes in the UK’s inflation and interest rate trajectories. Until these uncertainties are resolved, market confidence and home-buying activity are likely to remain subdued.

On the inflation front, the Personal Consumption Expenditures (PCE) price index rose by 0.4% month-on-month in February, in line with expectations, whilst the year-on-year increase stood at 2.8%. The core PCE index, which excludes food and energy, rose by 0.4% for the second consecutive month, whilst the year-on-year increase edged down slightly from 3.1% in January to 3.0%. Economists generally believe that price pressures will intensify further in March as the war between the US and Israel against Iran drives up prices for energy and other commodities. In fact, inflation was already at elevated levels prior to the conflict, primarily due to import tariffs imposed by the Trump administration, and the energy shock caused by the war is now compounding this. The minutes of the Federal Reserve’s policy meeting on 17–18 March revealed that an increasing number of policymakers believe interest rate hikes may be necessary to curb inflation. Participants specifically noted that ongoing conflict in the Middle East could lead to sustained rises in energy prices, with these higher input costs likely to be passed on to core inflation. The Fed currently maintains its benchmark overnight interest rate within the 3.50%–3.75% range, and the likelihood of a rate cut this year has diminished significantly. The labour market remains in what economists describe as a ‘low-hiring, low-layoff’ state, attributed to uncertainty stemming from trade policies and mass deportations. Although non-farm payrolls rebounded by 178,000 in March, the median duration of unemployment reached 11.4 weeks, the longest in nearly four and a half years. The number of people claiming continued unemployment benefits fell to 1.794 million, the lowest since May 2024, though this may be partly due to the expiry of benefit eligibility periods.

On the daily chart, the GBP/USD pair shows the Bollinger Bands narrowing and moving averages flattening out, suggesting a potential reversal at any moment. Following a bullish crossover on the MACD, the fast and slow lines are retracing towards the 0-line; as they are still some distance away, this indicates that the rebound is not yet complete. The RSI stands at 54, with market participants adopting a predominantly wait-and-see stance. On the four-hour chart, the Bollinger Bands are widening upwards and the moving averages are diverging upwards, indicating a bullish trend. However, the MACD fast and slow lines are on the verge of a death cross, and the price may pull back to the EMA200 (around 1.336) before resuming its upward movement. The RSI stands at 62, with market participants predominantly buying. The strategy is to buy on dips.

Trading Direction: Buy

Entry Price: 1.34

Target Price: 1.37

Stop-loss: 1.32

Support Levels: 1.32, 1.30, 1.28

Resistance Levels: 1.35, 1.38, 1.41