Sterling Weakness In Response to Weak Loan Data

by on November 26, 2013 2:16 am GMT

The Sterling see some profit taking today after U.K. mortgage approvals fell in October. Speculation that the British economy is still frail and that gross-domestic product will fail to exceed exceptions caused the Sterling to fall below 1.6200 to 1.6127 before finding a little support.

Former Bank of England policy maker Adam Posen has said that the ever-increasing prices in the housing sector could cause a bubble-like crisis and affect the pound. Mortgage approvals fell to 42,808 from the previous month’s revision of 43,182 in September, according to the British Bankers’ Association. The house-price index increased to the highest point in more than a decade.

“I don’t view this as a sustainable recovery, I view 1-1.5 percent of the growth rate as relying on fundamentals and the rest of it being this bubble,” said the former policy maker.

This situation in housing could reflect the same issues the United States is seeing in their own housing sector. For the last several months, the home sales have declined due higher mortgage rates and less affordability.

However, traders are still optimistic that the pound will continue to increase versus both the euro and dollar. On November 22, the premium on three-month contracts allowing investors to buy the pound against the euro over options to sell rose to 0.45 percentage point.