Money Transfer News: The Pound Sterling ends the month with a whimper

The Pound ended the month of July on a disappointing note in yesterday’s foreign exchange market. Having touched earlier in the month a 22 month high against the Euro and a 6 year high against the US Dollar, it fell against both currencies and indeed, against the majority of the 16 most actively traded currencies in the market.

Even renewed talk from the Bank of England (BoE) about the timing of an interest rate rise in the UK failed to ‘light a spark’ under the currency. On this occasion, it was the turn of the BoE’s Deputy Governor Ben Broadbent who said yesterday that there may be justification for a rise in the cost of borrowing earlier than the mid-2015 rise that markets are expecting.

Broadbent told Bloomberg "There's an argument for that, possibly, amongst all the other arguments, to a degree, yes, to a degree" but added that markets might be focusing too much on the timing of any rises rather than the pace at which they would happen. He repeated the mantra set by Governor Mark Carney that any rises were likely to be gradual and rates may not have to increase that much in total for the Bank to achieve its targets.

Of interest, Broadbent also said that he too was concerned that the strength of the pound. Like the International Monetary Fund (IMF), Broadbent feels that the pound could be overvalued by as much as 10% and this could hit the UK because of the economic sluggishness of the UK’s major trading partners, especially the euro zone.

Yesterday also saw the publication of the latest monthly house price index data from the Nationwide Building Society which showed that house prices in the UK rose at their slowest rate since April 2013 in July with a price increase of just 0.1%, down from 1% in June but still the 15th month in a row of monthly price rises.

The data seems to show that the introduction of new mortgage criteria in April by the BoE seems to have taken the heat out of the UK housing market.

Nationwide chief economist Robert Gardner said "The modest rebound in mortgage approvals in June adds weight to the notion that the slowdown will prove temporary, though the underlying pace of demand remains unclear. With the labour market strengthening, mortgage rates expected to remain low and consumer confidence rising, activity is likely to recover in the months ahead."

The Euro took advantage rising against the Pound despite the latest euro zone inflation data showing yet another fall in the rate of inflation which is now running at its lowest level since 2009. This increases the pressure on the European Central Bank (ECB) to take additional measures at their next policy meeting next week.

The latest Eurostat data shows that the euro zone consumer price index (CPI) registered an annual increase of just 0.4% in July, down from June’s figure of 0.5%.