The pound continues to slip in the aftermath of the European elections

For the second day in a row, the pound fell against the majority of the 16 most actively traded currencies as the repercussions of last week’s European and local elections are still being felt with the Liberal Democrat Leader Nick Clegg coming under pressure from his own party following their poor showing at the polls.

This despite the comments from Martin Weale, a member of the Bank of England's Monetary Policy Committee (MPC) who said yesterday that the MPC may need to raise UK interest rates from their record-low level of 0.5% which was set in March 2009 "sooner rather than later".

Weale set out the case for the possible policy action stating that the central bank must act soon to avoid a sharper and more painful tightening of policy in the future.

Weale said that despite the policy of a "gradual" tightening, that is by "no more than" 0.25% per quarter could see borrowing costs increase by up to 1% in a year, a much faster rate than had been previously expected.

Meanwhile, the latest data from the Council of Mortgage Lenders (CML) showed that homebuyer lending in London dipped in the first quarter of 2014 but still showed "significant growth" in comparison to 2013.

The CML data showed that the number of new home loans in the capital fell by 3% in the first quarter versus the preceding quarter but was still up by 22% on the same period of last year.

CML's Director General Paul Smee said "The usual seasonal dip in lending has affected London mirroring the rest of the UK but lending year-on-year shows a strong upward trend. First-time buyers continue to be a key driver as an increasing number realise their aspiration of owning a home. We are increasingly looking at not one overall UK housing market, but many smaller regional markets with different characteristics, and Greater London has particular challenges. Affordability remains a crucial factor and policymakers need to be aware that any measures they implement may have different effects in different locations."

The data also showed that the value of new loans to home-owners for house purchase was down by 10% on the preceding quarter to £5.6 billion which still represents a 37% rise compared to the first quarter of 2013.

In addition, the Confederation of British Industry’s (CBI) distributives trades survey revealed a slowdown in the pace of retail sales growth in the UK during May with the data showing that total retail sales retreated to a reading of 16, well short of the expected reading of 35.

Barry Williams, Chair of the CBI Distributive Trades Survey Panel and Asda SVP and Chief Merchandising Officer for Food said “Retailers’ predictions of further sales growth bore fruit this month. Although that growth was at a slower rate than expected (+43%), the fact we’ve seen a steady increase for six consecutive months is a sign we’re heading towards sustainable growth and strengthening consumer optimism – and it’s good to hear shopkeepers telling us they expect even stronger figures next month.”

One of the few bright spots for the pound yesterday was against the New Zealand dollar where the pound rose to trade at a 2 month high following some analysis in New Zealand highlighting concerns about the future prospects of the local economy.