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GBP-EUR house prices fall another 2.4% in May
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Tuesday, 10 June 2008 |
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Sterling ended a disappointing week last week as the currency continued to slide against the euro on Friday, extending losses a day after the European Central Bank said an interest rate rise was possible next month. Trichet's comments came after Thursdays interest rate decisions where both the ECB and the Bank of England kept rates on hold at 4 percent and 5 Percent respectively.
Trichet went on to say that the central bank may raise rates at its next meeting to tackle inflation risks, which should move to shrink the difference between euro zone and British rates and take the shine off sterling-denominated assets.
The blow from the ECB added to this week's pummelling of sterling, which lost ground against the Euro and hit a near three-week low versus the Dollar. Data released from the retailer John Lewis didn’t help matters with a 4.7% fall in sales highlighting the UK’s continuing economic weakness.
The start of the week saw Bradford and Bingley, who are the largest UK provider of buy to let mortgages, lose 25% on the value of their share price after they posted huge losses in the first quarter of 2008. Mortgage approvals fell to 58,000 in April which is a record low. At the same time, the Halifax reported that house prices fell another 2.4% in May which was nearly twice as much as expected.
This week’s key data releases will be inflation data in the UK on Monday followed by further housing and retail figures on Tuesday. In the Eurozone we will see import and export data on Monday and inflation data at the end of the week. With an interest rate rise in the Eurozone very much back on the agenda and Sterling very much on the back foot with probable rate cuts in the third quarter Sterling buying power is expected to remain definitively subdued.
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