Week Begins With More News From Struggling UK Housing Market
The Pound continued to make gains against the Euro reaching two week highs over the weekend fuelled by the fragile situation in Europe. However Sterling has been somewhat wrong-footed this morning as the Rightmove index has registered another month on month fall in house prices, this time by -3 percent. Whether or not this will be a temporary stumble remains to be seen with a wealth of data and information throughout the week. Inflation data is due from the UK tomorrow and the US on Wednesday.
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Pound Sterling – UK Markets
UK markets are opening the week to a broad stream of reports and data. Sterling, strengthened to its highest level in two weeks against the Euro but has now shown some vulnerability against both the Euro and Dollar following poor house price figures released this morning. Asking prices have fallen by 3 percent in a month according to Rightmove with larger falls predicted for 2011.
A household survey by the Bank of England has indicated that households are still struggling financially with 90 percent expecting to be heavily affected by the austerity measures. More than half of those measured are struggling to meet payments for credit cards and other unsecured debts.
There have also been some more positive releases this morning such as input prices which have shown rises for November. Good fintech news
has also arisen north of the boarder as the Bank of Scotland’s chief economist has confirmed that Scotland are avoiding a double dip recession with the manufacturing sector releasing strong figures– in line with other UK reports last week.
CPI inflation data due tomorrow will be significant – it is officially expected to continue at 3.2 percent but a rise is very possible, particularly following the surge in commodity prices.
US Dollar – US Markets
The US Dollar is lower against Sterling since last week but has been gaining so far today and is also continuing its rise against the Euro overall last week. Friday saw the Dollar pick up as US consumer sentiment and trade data helped shore up confidence.
Consumer sentiment picked up to a reading of 74.2 against an expectation of 73. Also unexpectedly, the trade deficit narrowed to 38.7 billion Dollars in October which was down from 44.6 billion in September.
Focus will now be on The Federal Open Market Committee meeting and interest decision on Tuesday followed by inflation data on Wednesday.
Euro – European Markets
Sentiment towards the Euro remains fragile with political leaders of various Euro-zone nations speaking out to show their support for the single currency but markets however are still focusing on inherent divisions in policy.
Later this week sees an EU meeting to discuss a permanent rescue mechanism for indebted nations from 2013. Italy, Belgium and Luxembourg are said to favour Euro-area bonds with Germany and France opposing the idea despite Sarkozy of France and Merkel of Germany making statements to pledge their full support since Friday for whatever is needed to sustain the Euro. Uncertainty ahead of this meeting which begins on the 16th may weigh on the currency over the course of this week.
Other Currencies – Highlights
China surprised markets by raising their bank reserve requirements for the sixth time this year by 50 basis points from 20th December.
An interest rate rise was widely expected particularly as inflation data came in at a twenty eight month high of 5.1 percent. This move instead is thought to be tackled at ensuring banks lock up amounts of money they would otherwise be able to lend driving inflation even higher. An interest rate rise however is still seen only as a matter of time. The Hong Kong Dollar fell against Sterling last week and the Chinese Yuan has dropped over the weekend.
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