Pound euro exchange rate in trouble as the housing market prompts fresh concerns over BoE intervention

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Published on Tuesday, 28 August 2012 16:06

Written by Rob Samson

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A look at the state of the GBP-EUR exchange rate at the close of play of the London trading session on Tuesday.

The pound to euro is sharply lower in late afternoon trade in London, GBP-EUR is seen at 1.2599 at 17:00.

The pound to dollar exchange rate is 0.2 pct higher at 1.5824.


"The Pound declined against the Euro this morning, falling below 1.26 and for the first time in three days, amid speculation that falling house prices will push the UK economy deeper into a recession, increasing the chances of further stimulus measures to be introduced by the Bank of England," notes Adam Solomon at TorFX.

There is a high probability that policy makers, led by the governor Mervyn King, will look to increase asset purchases as early as September, in another attempt to drag the economy out of the recession.

The Pound has declined this morning against the vast majority of the 16 most actively traded currencies following the Bank Holiday on Monday.

A report over-night showed that UK home values dipped 0.1% in August, while gilts advanced as a report showed that Spain’s recession worsening during the second quarter thus containing falls in this currency pair.

It is a particularly quiet week in terms of UK economic data with the focus falling on Thursday’s mortgage approvals.

"Although a degree of improvement is expected, these numbers along with house price data from Nationwide, Hometrack and Land Registry could highlight the fact that the UK property market continues to struggle," notes Solomon.