Sterling declined across the board as July Halifax House Prices showed a decline to -0.6% compared to 1.0% in June, slightly worse than the -0.5% consensus.The pound fell around 0.4% against the euro to a 1 month low of 1.2554 after the data, but made a slight recovery and finished trading around 1.2582. Against the US dollar it was a similar story which saw a fall to 1.5542, then a recovery to 1.5618.
Analysts said expectations of the ECB’s action to ease the Eurozone’s debt crisis has refocused investors minds back onto poor UK economic fundamentals and taken pressure of the euro for now.
Market players were also jittery ahead of the BoE’s quarterly inflation report tomorrow, when the central bank gives its latest forecasts for growth and inflation, which may open the door to more quantitative easing or an interest rate cut.
Tensions within the U.K. coalition government escalated Monday after a Conservative Party rebellion forced Deputy Prime Minister Nick Clegg to abandon his long-held goal of reforming the country’s unelected House of Lords. Mr. Clegg said the Conservatives had broken part of their coalition contract with the Liberal Democrats by failing to honor their commitment to the reform.
The ECB said last week it may soon resume its programme of buying government bonds of struggling euro zone countries, leading to some optimism that European authorities would act to dampen bond yields in Italy and Spain.
The euro prospered yesterday afternoon hitting a one month high of 1.2445 before settling at just above 1.2400 against the dollar further helped by Greece and its international creditors agreeing on the need to strengthen policy efforts to support the economy and comply with its bailout terms after nearly two weeks of meetings in Athens.
The markets optimism may prove to be short-lived as doubts linger among investors regarding the potential effectiveness of the measures pledged by European policy makers. As such the current euro rally is on thin ice and more choppy trading is expected.
Germany’s factory orders fell 7 percent in June from a year earlier, the steepest drop since October 2009, according to economist estimates before the figure is released in Berlin tomorrow.
European stocks are expected to start a touch lower this morning as the recent rally for risk assets runs out of steam, while the focus in London will likely be on banking group Standard Chartered, which stands accused by a U.S. regulator of running a “rogue institution.” Standard Chartered is accused of hiding more than $250 billion in illegal Iranian transactions for nearly a decade.
The Swedish krona dropped against most of its major peers as Statistics Sweden said service production fell 0.2 % from May, when it gained 2.3 %. Production rose an annual 1.1 %, compared with May’s 1.9% jump.
Early this morning Australia’s central bank kept interest rates steady at 3.5% as expected, saying it sees signs that China’s economic slowdown has bottomed out, while the local economy continues to grow solidly.