Tuesday August 30, 2005 - 09:58:22 GMT
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INVESTICA Ltd - www.investica.co.uk
Sterling growth fears
Sterling pushed back to 1.8070 against the US currency in early Europe on Monday as the dollar came under pressure, but the gains were reversed later in the day and Sterling weakened back to 1.7925 in New York, retaining a weaker tone in early Europe on Tuesday. Sterling was unable to make any headway against the Euro and weakened further after the UK data. Spending doubts will continue to unsettle Sterling in the short term.
The latest CBI retail survey remained weak with the headline figure deteriorating to a 7-year low and confidence over spending trends will remain weaker in the short term, especially with rising energy prices. The Hometrack survey of house prices released on Monday recorded a 0.2% monthly decline for August, the 14th consecutive decline, and there was a 3.7% annual decline in prices. The data on Tuesday recorded the slowest growth in mortgage lending since June 2002 while the increase in consumer credit was lower than expected with an increase of GBP1.2bn, which was the slowest annual increase since 2001. The lack of confidence in the housing markets will continue to undermine consumer spending and restrain spending growth. This, in turn, will tend to keep Sterling on the defensive as growth concerns are liable to intensify again.
The latest IMM data recorded an increase in long Sterling positions, but the positioning bias is modest at this stage. The data will slightly undermine the potential for Sterling gains, but should not have a major impact.
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