Sterling mixed on push and pull of domestic, US concerns
Sterling edged higher against a soft dollar but weakened against a buoyant euro on Monday, struggling to forge a clear direction amid the swirling mix of UK and international economic influences.
On the one hand, a call from a Bank of England policymaker for lower interest rates bolstered the view that the Bank would cut UK rates next week and at least twice more this year to help prop up the slowing economy.
Another measure of the softening UK housing market also helped dampen sentiment toward the pound against the euro and, marginally, on a trade-weighted basis.
But the dollar's broad slide amid renewed concerns about the threat of U.S. economic recession and uncertainty about how much the Federal Reserve will likely cut rates this week helped the pound against the greenback.
"People are steering clear of the dollar," said Neil Mellor, currency strategist at Bank of New York Mellon.
At 1515 GMT sterling was up at $1.9860 from around $1.9825 late in New York on Friday, while the euro rose half a percent to 74.45 pence.
On a trade-weighted basis, sterling was down slightly at 96.80. On Friday, that index reached 97.00 for the first time in three weeks.
In an interview with the Guardian newspaper, MPC member David Blanchflower said current interest rates of 5.5 percent were "restrictive" and argued that focusing too much on inflation right now was akin to "fiddling while Rome burns."
Blanchflower is widely considered to be the most "dovish" of the nine voters on the Bank's Monetary Policy Committee. His call for lower interest rates came as renewed concern about the U.S. economy and the global financial system triggered another lurch lower in Asian and European stock markets on Monday.
"His comments would always be dovish, but there's an interesting debate on UK monetary policy. At the end of the day, the Bank has an inflation target it has to keep," said Paul Robson, strategist at RBS Global Banking.
For more on Blanchflower's comments, which differed from the tougher anti-inflation rhetoric from MPC member Andrew Sentance and Governor Mervyn King last week.
Data from house price research company Hometrack, meanwhile, showed that house prices in England and Wales rose this month at the slowest annual pace since mid-2006.
On the month, prices fell for a fourth straight month.
Robson said the Hometrack data were second tier, and noted that mortgage approvals figures due later in the week would give a more accurate indication of how serious the property market slowdown is.
"A further deterioration (in these figures) would be more worrying," Robson said.
The leading UK stock market, meanwhile, was down more than 2 percent in late trade .FTSE, tracking losses of 4 percent or more on major Asian bourses .N225 .HSI and dragged down by another batch of weak U.S. housing data.
Rate futures are fully pricing in a UK rate cut at next week's policy meeting to 5.25 percent, mirroring the most recent Reuters survey of 58 economists in which all forecast a cut to 5.25 percent.
Sourced by Reuters.