Thursday March 31, 2005 - 10:12:32 GMT
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INVESTICA Ltd - www.investica.co.uk
Sterling remained firm on Wednesday despite disappointing data. Sterling was unable to push above 1.8850 against the US currency, but made further ground against the Euro. Sterling weakened in early Europe on Thursday after poor housing data, although the losses were measured.
The Nationwide Bank reported that there was a 0.6% decline in house prices for March, the weakest performance for close to 10 years, and the annual increase slowed to 7.9%. The CBI retail sales report on Wednesday was significantly weaker than expected with a decline to -9 in March from +2 in February, the worst performance in six months. The other UK data was mixed with lower consumer credit offset by evidence of rising mortgage lending.
The combination of slower spending and a weaker housing market would lessen the need for a further increase in interest rates. Sterling will, therefore, be vulnerable to a closing of long positions in the short term on reduced market expectations of a near-term interest rate increase, although uncertainty will persist given that UK data has not been consistent over the past few weeks.
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