Thursday July 29, 2004 - 10:14:46 GMT
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INVESTICA Ltd - www.investica.co.uk
UK housing data strong
The strong housing data for July will revive expectations of a more aggressive hike in UK interest rates. High oil prices will also offer near-term Sterling support. These factors should help offset longer-term concerns for now. Sterling has the potential for a recovery against the dollar towards 1.8250, although volatility will remain high. Sterling could push to 0.6580 against the Euro even though it offers very little value at current levels on a longer-term perspective.
Sterling found support at the 1.8150 level against the US currency and rallied back to 1.8280 in early Europe on Thursday before retreating back to 1.8150 as the dollar rallied again. Sterling strengthened to 0.6605 against the Euro before weakening back to 0.6615.
The figures from the Nationwide Bank reported that housing prices accelerated in July, with a 2.1% monthly increase pushing the annual rate up to 20.3%. Credit and mortgage lending figures also remained strong for June. This will revive speculation over a more aggressive central bank monetary tightening and this will offer Sterling support. The chances of an August rate hike remain very high which will help cushion any Sterling selling pressure.
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