LONDON, May 19 (Reuters) - Sterling fell against the dollar and euro on Monday, shrugging off a robust housing market survey, with sentiment staying heavy due a recent run of poor data and expectations for the UK economy to slow further.
Asking prices for property in England and Wales hit a record high in May and house price inflation accelerated, a survey from property website Rightmove showed, despite expectations for a much weaker housing market this year [ID:nL1635815].
Economists are predicting falls in house prices of about 10 percent this year and Bank of England policymaker David Blanchflower has warned prices could dive by about one-third unless aggressive, immediate action is taken.
At the same time, interest rates are unlikely to come down fast given worries over inflation after a decade in which house prices nearly trebled.
As growth slows and inflation rises, the pound has suffered from expectations of economic misery ahead, falling to three-month lows versus the dollar last week and hovering near record troughs against the euro.
"The UK data out overnight hasn't had any major impact at all...in general the downside risks remain. Confidence will be undermined by the high inflation, low growth outlook that has been painted by the Bank of England," said Geraldine Concagh, economist at AIB Group Treasury in Dublin.
By 1357 GMT the pound was down 0.28 percent on the day at $1.9510 <GBP=>, having hit its lowest since late February last week at $1.9363. The euro was up 0.1 percent at 79.74 pence -- staying fairly close to last month's record high at 80.98 <EURGBP=>.
Analysts said pressure on sterling was unlikely to ease ahead of key events this week including Wednesday's Bank of England minutes from its last policy meeting and key UK retail sales numbers on Thursday.
Even though expectations for a June interest rate cut from the current 5 percent have now been largely unwound, the pound has found little relief on the policy front because credit crunch worries are strangling confidence. Some analysts are braced for recession.
"The UK recession will be deep and prolonged and so will the pound's performance," BNP Paribas said in a note to clients.
European Central Bank President Jean-Claude Trichet said earlier that the world was experiencing an "ongoing and very significant market correction" and policymakers should make price stability their top priority.
(Reporting by Veronica Brown; Editing by Ian Jones)
((RM:veronica.brown.reuters.com@reuters.net; Tel: +44 207 542 6745))
Keywords: MARKETS STERLING CLOSE
LONDON, May 19 (Reuters) - Sterling was flat against the dollar and euro on Monday, shrugging off a robust housing market survey, with sentiment staying heavy due a recent run of poor data and expectations for the UK economy to slow further.
Asking prices for property in England and Wales hit a record high in May and house price inflation accelerated, a survey from property website Rightmove showed, despite expectations for a much weaker housing market this year [ID:nL1635815].
Economists are predicting falls in house prices of about 10 percent this year and Bank of England policymaker David Blanchflower has warned prices could dive by about one-third unless aggressive, immediate action is taken.
At the same time, interest rates are unlikely to come down fast given worries over inflation after a decade in which house prices nearly trebled.
As growth slows and inflation rises, the pound has suffered from expectations of economic misery ahead, falling to three-month lows versus the dollar last week and hovering near record troughs against the euro.
"The Rightmove data has been largely discounted because consumers can ask what they want for their houses but it doesn't mean they will get that," said Paul Robson, currency strategist at RBS Global Banking.
"The economic reality suggests that the UK housing market is going to slow and that's been fairly well factored into sterling," he added.
By 0748 GMT, the pound was flat at $1.9560 <GBP=>, having hit its lowest since late February last week at $1.9353. The euro was also broadly steady at 79.68 pence -- staying fairly close to last month's record high at 80.98 <EURGBP=>.
Analysts said pressure on sterling was unlikely to ease ahead of key events this week including Wednesday's Bank of England minutes from its last policy meeting and key UK retail sales numbers on Thursday.
Even though expectations for a June interest rate cut from the current 5 percent have now been largely unwound, the pound has found little relief on the policy front because credit crunch worries are strangling confidence. Some analysts are braced for recession.
"The UK recession will be deep and prolonged and so will be pound's performance," BNP Paribas said in a note to clients.
European Central Bank President Jean-Claude Trichet said earlier that the world was experiencing an "ongoing and very significant market correction" and policymakers should make price stability their top priority.
(Reporting by Veronica Brown; Editing by Ruth Pitchford)
((RM:veronica.brown.reuters.com@reuters.net; Tel: +44 207 542 6745))
Keywords: MARKETS STERLING OPEN
LONDON, May 16 (Reuters) - The pound fell versus the euro on Friday as investors were worried by the combination of high inflation and slowing growth in the U.K. economy.
Sterling has been on the back foot this week after the Bank of England delivered a bearish prognosis on British economic prospects in its quarterly inflation report on Wednesday.
The report showed that inflation is set to remain stubbornly high in the coming months, limiting the central bank's ability to act to bolster an ailing economy with interest rate cuts.
"It's surprising that the waning expectations of rate cuts have not supported the currency more forcefully," said Philip Shaw, chief economist at Investec.
"It reflects the downside risks...and the general sense of malaise that pervades the (UK) economy."
By 1350 GMT the euro was up 0.35 percent at 79.54 pence <EURGBP=>. The pound was steady at $1.9467 <GBP=>.
Before the inflation report the Bank of England was widely seen as cutting rates by 25 basis points to 4.75 percent in June, but a Reuters poll conducted after the report found a majority predicting it would hold off from reducing them until the third quarter [BOE/INT].
Investors will look to minutes from the Bank of England on Wednesday for more insight into the next move on UK interest rates. A Reuters poll of economists forecast that eight members of the committee voted to keep rates on hold at 5 percent, while one backed a cut.
(Reporting by Simon Falush)
(Editing by Ian Jones) ((simon.falush@reuters.com. +44 20 7542 7681) Reuters Messaging: simon.falush.reuters.com@reuters.net))
Keywords: MARKETS STERLING/CLOSE
LONDON, May 16 (Reuters) - The pound fell versus the euro on Friday with investors, worried by a toxic combination of high inflation and slowing growth in Britain, wary about the currency.
Sterling has been on the back foot this week after the Bank of England delivered a bearish prognosis on British economic prospects in its quarterly inflation report on Wednesday.
The report showed that inflation is set to remain stubbornly high in the coming months, limiting the central bank's ability to act to bolster an ailing economy with rate cuts.
"Usually higher rates are associated with being good for a currency, but they are seen as being harmful for growth in the UK which will be harmful for the currency," said Tom Levinson, currency strategist at ING.
By 0750 GMT the euro was up 0.3 percent at 79.49 pence <EURGBP=>. The pound was up 0.1 percent at $1.9492 <GBP=>.
The pound earlier got a slight boost against the dollar as traders said stop-loss levels at around $1.95 were breached, but the currency is well off the $2 level last seen less than a month ago.
Before the inflation report, the Bank of England was widely seen as cutting rates by 25 basis points to 4.75 percent in June, but a Reuters poll conducted after the report found a majority predicting it would hold off from reducing them until the third quarter [BOE/INT].
(Reporting by Simon Falush)
(Editing by Gerrard Raven) ((simon.falush@reuters.com. +44 20 7542 7681) Reuters Messaging: simon.falush.reuters.com@reuters.net))
Keywords: MARKETS STERLING OPEN
LONDON, May 16 (Reuters) - Sterling rose to days highs versus the dollar on Friday with traders citing technical levels around $1.95 being taken out.
The pound hit an intra-day high of $1.9523 as traders said stops around Thursday's highs were breached above the $1.95 area.
"It's just stops going through $1.9500, $1.9510," said a trader in London."
By 0712 GMT the pound was up 0.2 percent at $1.9511 <GBP=> beyond the high on Thursday of $1.9501.
(Reporting by Toni Vorobyova and Simon Falush) ((simon.falush@reuters.com. +44 20 7542 7681) Reuters Messaging: simon.falush.reuters.com@reuters.net))
Keywords: MARKETS FOREX/STERLING
Next: Sterling slips, UK inflation risks threaten growth