Consumer Pressures Hurt Sterling

Daily Forex Fundamentals | Written by Investica | Jul 29 08 10:35 GMT |

Serious stresses in housing and consumer spending will tend to undermine Sterling even if European fears limit short-term selling pressure. There will still be some significant Sterling protection from evidence of sustained weakness in the Euro-zone as there should not be any major net capital flows out of the UK into Europe. In this context, Sterling recovered back to 0.79 against the Euro and 1.9950 against the dollar in US trading on Monday. The financial-sector fears will tend to undermine the UK currency, but the impact should be limited as the main short-term focus has not been on the UK banking sector which will help protect Sterling. UK mortgage approvals fell to 36,000 in June from 42,000 the previous month which was fresh record low while net lending data was also weak and indicates very subdued consumer demand. In addition, the latest UK CBI retail survey recorded a net balance reporting higher sales of -36 in July from -9 the previous month. This was the lowest report since 1983 while there was extreme weakness in the household goods sector. Investica http://www.investica.co.uk Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.