Forex - Pound hits all-time low vs euro after weak Halifax survey
Tue, Apr 8 2008, 11:33 GMT
afxnews.com
LONDON (Thomson Financial) - The pound stayed weak, hitting all-time lows against the euro, after reports of further weakness in the UK housing market.
The Halifax, the UK's biggest lender, said house prices fell by a massive 2.5 percent in March from February, the worst reading since September 1992 and way below analysts' forecasts for a much smaller 0.4 percent fall.
"Weak Halifax UK house price data continues to hurt the pound," said Robert Howard, analyst at Thomson's IFR Markets.
The survey adds to a stream of negative surveys on UK house prices, and underpinned expectations that the Bank of England will act to cut interest rates at its meeting this week.
"The increasing danger of a sharp housing market correction heightens pressure on the Bank of England to cut interest rates by a further 25 basis points from 5.25 percent to 5.00 percent on Thursday," said Howard Archer, chief UK economist at Global Insight.
The pound fell sharply against the euro and the dollar on the news, hitting an all-time low of 0.7988 to the single currency. The pound also hit a six-week low of 1.9703 against the dollar.
Later today there is a batch of figures from the U.S. to determine market direction, with April consumer confidence and February pending homes sales data due at 1400 GMT.
"US housing data - expected to be weak -- are likely to dampen sentiment once again," said Gavin Friend, currency analyst at Commerzbank.
But markets are likely to put more emphasis on the minutes to the Federal Open Markets Committee's March 18 meeting.
At the meeting, eight of the ten FOMC members voted to cut interest rates by 75 basis points to 2.25 percent, with the two dissenters calling for less aggressive action. Today's minutes should cast more light on the Fed's thinking and inform market expectations for the next rate decision on April 30.
"Should the impression that the Fed could slow down the pace of the rate cut cycle be further underpinned today, the dollar is unlikely to find any strong, sustainable support in the current environment," said Friend at Commerzbank.
There will be more central bank action dominating market sentiment later in the week.
The Bank of Japan is widely expected to keep its overnight call rate target unchanged at 0.5 percent tomorrow, and the European Central Bank is similarly expected to keep its key Refi rate on hold at 4.00 percent. The BoE decision is also due on Thursday.
Moving into the weekend, finance ministers from the Group of Seven rich nations will meet from Friday in Washington. Many analysts are speculating that the subject of dollar weakness could come up, with the possibility that authorities could call for concerted action to prop up the U.S. currency.
Overnight, Japanese Finance Minister Fukushiro Nukaga said he wanted to discuss ways to stabilize the global economy and financial markets with his colleagues at the G7, but did not mention the possibility of collective action on currency markets.
"I hope to exchange views frankly about the financial instability stemming from the sub-prime loan problem and its impact on the U.S. real economy, as well as on the situation in Europe," the minister told reporters.
London 1108 GMT London 0851 GMT |
