Pound Under Pressure As Housing Market Disappoints

Sterling is starting the week out on the wrong foot, sitting around 1.19 against the Euro and 1.55 against the US Dollar. Despite rising against the US Dollar last week for the first time in six weeks, news over the weekend had already arrived to dampen UK markets before the week had even begun. Dropping house prices made some of the Monday morning front pages thanks to the Rightmove data over the weekend. This was doubled up by figures from the Bank of England this morning showing a fall in mortgage approvals. This weakness in the UK housing markets is for many the rot at the centre of the slowing UK economy. The fragility in the economy is only likely to come even further under scrutiny with public finance data tomorrow and then the Bank of England minutes from the last rate meeting on Friday. Inflation is still well above target and there is mounting concern over the cuts that Chancellor of the Exchequer George Osborne will be detailing on 20th October. It may therefore be a volatile week for the Pound with a lot of new information in the first half of the week. The US Dollar remains at around a five week low against the Euro. Consumer sentiment towards the economy fell to its lowest level on Friday continuing the flow of negative news on the situation in the US. Tomorrow’s Federal Reserve meeting is expected to result in the ongoing hold of low interest rates although there is uncertainty over whether any further easing or stimulus measures will be taken to shore up the economy. There are further US Dollar releases on everything including housing data and unemployment rates spread throughout the week which may bring movement to all major currencies as US data tends to influence investor opinion the global economy as a whole. The Euro is bearing up fairly well given the week opens following speculation over the state of Ireland’s finances last week and whether they may require help from the International Monetary Fund. Barclays Capital issued a report which suggested Ireland may require external assistance due to large losses in the financial sector. However both Ireland and the International Monetary Fund have sought to calm nerves saying that this is not foreseeable. Stress tests on Greek banks have been delayed until the end of October to allow the country’s capital raising programme to be assessed. The weekly calendar for news from the Eurozone begins with consumer confidence and industrial orders on Wednesday reflecting conditions in the European manufacturing sector. Should investors become risk averse this week on any more signs of heavy global slow down, the Euro may become vulnerable.