The pound fell on Friday as UK mortgage lending tumbled to a fresh 12 month low after falling 13% in January according to the Council of Mortgage Lenders (CML).
CML economist Peter Charles had few words of comfort for the housing market pointing out that a “significant funding challenge” was faced by Britain over the next couple of years, highlighted in this week’s Bank of England’s Inflation Report with up to £500 billion of wholesale term debt due to mature by the end of 2012 suggesting the level of activity in the mortgage market can be expected to remain constrained for some considerable time.
UK retail sales grew strongly in January though the figures were skewed by the extreme weather patterns experienced this winter and last. Sales in January were up by 1.9% from December and by 5.3% from January 2010. However, shoppers faced severe snow disruption in December while the weather was more favourable last month making it difficult to read much into the figures.
Analysts remain concerned that the rise in VAT and worsening economic conditions including higher unemployment and increasing inflation will hurt the consumer.
Meanwhile, the euro advanced against the pound and dollar on Friday on increasing expectations that the European Central Bank (ECB) will raise EU interest rates after a senior ECB official suggested that the ECB will be ready to tighten policy as price pressures grow.
The safe haven qualities Swiss franc and Japanese yen were in demand as the continued trouble in the Middle East boosted interest after reports that Egypt had authorised Iran to send two warships through the Suez Canal for the first time in nearly thirty years.
The dollar was broadly lower against major currencies ahead of the extended holiday weekend in the US.
Commentary by Tony Redondo
“Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.”
