Currency Update – Monday 21st July

A quiet start to the week as far as the UK stats are concerned, with only the release of the Rightmove Survey in the early hours of this morning to get us talking . The survey points to a 2% drop in house prices since July last year & tendency for those in a position to buy & prepared to sit it out, to chase the fall in house prices. It seems as though sellers are coming round to the idea that they need to under cut the competition from the outset, rather then wait for those elusive buyers to barter them down, in order to get their property sold.

Consequently further falls are expected in house prices, with the extent to which these will fall linked to the reasons behind the sale of the property & the extent to which the finance sector wish to support mortgage lending. After the fall experienced in Oil prices on Friday, the price per barrel rose over the weekend as a result of fading hopes for a resolution over Iran’s nuclear activities, following talks over the weekend.
Sterling fell slightly over the weekend, part due to comments made over the weekend, by one on the MPC members, David Blackflower, to suggest the UK is heading for a recession & as such the MPC should cut rates. However this stance is hardly surprising as Blanchflower has voted for a rate cut at every MPC meeting this year. We expect to see his name next to a vote for a rate cut this month, when the MPC minutes are released on Wednesday. Our economists believe we will see a 8-1 vote in these minutes for the unchanged verdict.

Further data releases this week are the June Retail sales figures, where a drop in sales is expected & the CBI industrial Trends survey, again expected to show a fall in the headline orders.
Other than this a fairly quiet week is anticipated, as the UK goes into holiday mode.

Hazel Wilkinson | Treasury Solutions | Currency Desk