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The pound drops against the dollar on housing and retail news

Tue, Sep 9 2008, 10:16 GMT
by Benny Menashe

Finotec Group Inc.

The U.K. pound traded near the lowest level in 2 and a half years against the dollar after an industry report showed house prices fell in August although not as bad as the previous month, however it boosted the case for the Bank of England to lower interest rates. The Sterling fell earlier as the Royal Institution of Chartered Surveyors reported the number of real-estate agents and surveyors said prices dropped exceeded those reporting gains by 81 percentage points, from 83 percentage points in July. The British currency was also affected after a government report showed producer prices declined last month by the most since 1986. ``In the medium term, sterling is extremely vulnerable, it's still very over-valued on a long-term basis,'' Ian Stannard, a currency strategist in London at BNP Paribas SA, ``There's quite a lot more downside to come.'' The GBP/USD is currently trading at $1.7604 as of 7:41am, GMT.

Fewer Americans purchased previously owned homes, a sign that falling home prices aren't enough to bring buyers back into the market, economists said before a private report today. The index of pending home resales fell 1.5 percent after a gain of 5.3 percent in June, according to traders and economists. The decline would be the fourth this year as tighter credit conditions keep would-be buyers from taking advantage of lower prices. ``More houses are coming into the market because of foreclosures, and those are driving prices down,'' said Dana Saporta, an economist at Dresdner Kleinwort in New York. ``The trend might be a little better going forward on pending home resales because of the drastic price reductions, but that would not necessarily be an indication that the housing market is healthy.'' The EUR/USD is currently trading at $1.4124 as of 8:05am, GMT.

The Australian dollar slumped as stock losses encouraged investors to pare holdings of higher-yielding assets. The Australian dollar also dropped to its lowest in 13 months against the U.S. currency as a government report showed home loans dropped for a sixth month. The Australian and New Zealand dollars ``tend to be driven by risk appetite,'' said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney. ``If equities are falling in this region it's unlikely to be helpful.'' The AUD/USD is currently trading at 0.8082 as of 8:06am, GMT.

Today's Economic Events

Published on  Tue, Sep 9 2008, 10:23 GMT