The Pound fell to a low of 1.9909 against the Dollar yesterday, before bouncing back later in the session, after an industry report from Rightmove Plc showed that UK house prices dropped by the most since the survey began in 2002.
The average price for a home in Britain fell an annual 2% this month to £235,219 as prices fell a further 1.8% on the month and tighter lending conditions led to an increased number of unsold homes swamping the market.
A separate report also indicated that house prices will decline 10% in 2008 and a further 6% next year as the looming threat of a recession means that Bank’s will impose even tighter lending restrictions while consumer prices are likely to breach 4.0% amid record high fuel costs.
The Pound also slumped against the Euro for a second day in succession as Bank of England policy maker David Blanchflower, who has previously voted for a more aggressive easing of UK interest rates, said that the Bank has little option but to reduce borrowing costs.
In an interview in the Guardian newspaper, Blanchflower, acknowledged the recent spate of negative reports surrounding the UK economy and said that “we are going into a recession and we are probably in one right now”.
It is not at all surprising that Blanchflower advocates for a reduction in rates and the minutes of the Bank’s last policy meeting will probably reflect his dovish outlook for the economy.
The views of David Blanchflower contrast will a recent statement by another member of the Central Bank’s monetary policy committee, Andrew Sentence, who said that rising inflation was the primary threat to the economy.
The Dollar fell against the Euro yesterday and also failed to hold to earlier gains made against the Pound as index of leading economic indicators forecast that the U.S economy will continue to struggle over the next 3-6 months.
The Conference Board’s index fell a further 0.1% in June after a 0.2% drop the previous month as rising unemployment claims and U.S stock market declines erode confidence while falling equity prices means that the economy still stands on the brink of a recession.
Elsewhere, the Dollar also came under pressure after crude oil prices rose the lowest level in six weeks amid reports that a tropical storm threatened production in the Gulf of Mexico and Iran again resisted demands for a suspension in their nuclear research program.
Data Released 22nd July
Nothing of significance
written by Adam Solomon
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- The Pound plummets to the lowest level on record against the Euro as UK house prices decline and inflation stagnates
- The Pound declines against the majors after UK house prices drop by the most since 2002
- The Pound declines as UK mortgage approvals fall to the lowest level since records began in 1999
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