Thursday October 28, 2004 - 10:10:05 GMT
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INVESTICA Ltd - www.investica.co.uk
Uk housing data weak
The weak housing data will reinforce speculation that UK interest rates have peaked which will tend to undermine the UK currency. The price action today, however, suggests that much of the domestic deterioration is now reflected in the price and this will limit the potential for further depreciation. Sterling is liable to drift towards 0.6970 against the Euro, but Euro gains through here will be tough. Sterling is at risk of a further corrective decline to 1.8250 against the US currency.
Sterling was unable to sustain a push above the 1.84 level against the US currency and weakened to a low of 1.8275 in New York as the US currency rallied before pushing back to 1.8295. Sterling was unable to make significant headway against the Euro despite profit taking on long Euro positions, but it also showed some resilience in the face of disappointing data and held close to 0.6950.
The UK housing data was weak with the Nationwide Bank reporting that house prices fell by 0.4% in October, the first monthly decline since October 2001. The annual increase also slowed to 15.3%. This will reinforce speculation that the sector is slowing sharply and will tend to undermine Sterling on expectations that UK interest rates have peaked. However, the currency's resilience after the data suggests that much of the news has been reflected in current values and this will limit selling pressure.
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