The Pound fell for the fourth day in a row

The Pound fell against both the Euro and the US Dollar for a 4th day in a row in the foreign exchange markets yesterday despite the Bank of England's (BoE) Monetary Policy Committee (MPC) maintaining both its base interest rate at 0.5% and the size of its asset purchase programme at £375 billion unchanged.

UK interest rates have now been kept at their historic low level of 0.5% since March 2009.

The news was expected by the majority of analysts who currently foresee the MPC starting to raise the Bank’s base rate in the fourth quarter of 2014 "in light of indications that labour market slack is being eroded faster than previously expected".

Only yesterday, new BoE Deputy Governor Minouche Shafik said, during her appointment testimony to the Treasury Select Committee that August's quarterly inflation report will reveal a narrower estimate for slack in the economy of between 1%-1.5% of GDP and that productivity developments are also crucial in determining the timing and path of bank rate hikes.

Meanwhile, the Royal Institution of Chartered Surveyors (RICS) suggested yesterday that London house prices are expected to fall over the next three months although house prices in the capital are still expected to rise over the next year as buyers make fewer inquiries about homes in London and show an "increased air of caution".

Simon Rubinsohn, RICS Chief Economist said "Buyer enquiries in the capital are now slipping back, which suggests that the very sharp upward move in prices will flatten over the coming months".

The RICS monthly house price balance eased from a figure of 56 in May to 53 in June, slightly below forecasts. RICS suggested that tighter mortgage lending standards in April and speculation about the timing on UK interest rate rises could be to blame.

The catalyst for yesterday’s falls for the pound in the currency markets seemed to be the latest data from the Office for National Statistics (ONS) which reported that the UK trade deficit widened in May to £9.2 billion due to lower shipments from manufacturers into the European Union and rising overall imports. The rising value of the Pound may be making British goods less competitive around the globe.

The UK trade deficit rose from £8.8 billion in April and is at its widest for four months.

The value of the Pound against the Euro has risen by some 12% in the last 12 months. Against the Dollar, the Pound’s value has risen by some 4% since the start of 2014.

Elsewhere, the latest data on China's foreign trade showed a smaller than expected improvement in the underlying fundamentals of the Chinese economy leading analysts to speculate about an easing bias on the part of authorities.

Chinese exports rose at a 7.2% year-on-year rate in June, up from a 7% rate in May but lower than the 10.4% estimated by analysts.

The data also showed that overseas sales of goods from China are running well below the pace seen throughout 2013.