The Pound slumped to a fresh record low against the Euro yesterday and the UK currency also recorded sharp losses versus a basket of currencies, including the U.S Dollar, as an industry report confirmed that UK home sales dropped to the lowest level in at least thirty years.
According to the report from the Royal Institution of Chartered Surveyors, property sales plunged to an average of 10.9 home in the last quarter, the fewest amount since the series began in 1978.
The RICS index also showed that the percentage of agents reporting falling prices exceeded those reporting gains by 82 points, an indicator that has been negative since August 2007, while a separate gauge of the report indicated that UK retail sales plunged for the first time since 2005.
The Bank of England have slashed interest rates from 5.75% at the beginning of 2008 to just 3.0% in November but a cohesive effort to lower borrowing costs in October preceded the single biggest cut in rates since 1983, bringing the UK benchmark lending rate to lowest level since 1955.
The escalating financial crisis has led to heightened concerns that the UK economy will enter a deep and prolonged recession but the unprecedented injection of liquidity and a 2.0% drop in interest rates is designed to revive growth and spur lending.
The dramatic reduction has already prompted banks to significantly lower the libor rate, while lenders have bowed to pressure from the government to pass on the cut to their clients and boost the floundering UK mortgage market.
Even so, the general lack of mortgage finance remains a major stumbling block in the revival in the housing market as prices extended declines in all 12 of the major regions monitored by the Royal Institution of Chartered Surveyors.
Falling house prices and the rising jobless rate are encouraging consumers to rein in spending as retail sales fell an annual 2.2% in October to record the first decline since April 2005.
The Pound subsequently declined against the majority of the 16 most actively traded currencies and the UK currency continues to test the major support at 1.2200 versus the Euro and with very little appetite for Sterling above 1.2300 further declines are likely.
Data Released 11th November
U.S Veteran’s Day Partial Market Holiday
U.K 09:30 DCLG House Prices (September)
U.K 09:30 BoE Quarterly Inflation Report
EU 10:00 Industrial Production (September)
written by Adam Solomon
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