Thursday July 12, 2007 - 10:32:39 GMT
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INVESTICA Ltd - www.investica.co.uk
UK stresses start to appear
Expectations of further Bank of England interest rate increases will underpin Sterling initially, but a sudden switch in sentiment could weaken the UK currency sharply.
The UK currency edged lower in early Europe on Thursday before pushing back to 2.0350 as the dollar remained under pressure.
The latest RICS house-price survey was significantly weaker than expected with the proportion of agents reporting an increase in prices dropping to 10.6% from 22.5% the previous month. This was the weakest survey since the beginning of 2006 and suggests that the property market is slowing.
Given the very high consumer debt levels, there will be the risk of a sharp deterioration in the sector which will undermine Sterling. The latest BCC growth survey was also downbeat. Sustained weakness in global financial markets would also tend to undermine the UK economy.
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