British Pound Weakens Against Euro to Touch 8-Month Low amidst Weak Housing Data

The Pound has plummeted to the lowest level of last 8 months against Euro. The fall was mainly resulted due to the housing data released for the month of December. It states that the house prices in UK have plummeted for the 6th straight month and hence the Bank of England is more likely now to move forward with a decision to expand the stimulus.

Home prices in Wales and England have slipped down by 0.1%; in November, the decline was exactly the same. The statistics was released by Hometrack Ltd, a London based property research group. The overall values suffered a loss of 0.3% in 2012 and if estimates turn out to be true, the values will go down by 1% in 2013. Incidentally, Bank of England suspended the asset-purchase program worth $606 billion in last November. The asset purchase program was expected to boost the sagging economy of the country.

The Senior Currency Strategist of Rabobank International, Jane Foley stated that a lower value of Pound makes the investors more concerned over the possibilities of United Kingdom losing its AAA rating in next year. The investors are also thinking that to help the weak economy, policymakers of the country can allow more quantitative easing in future.

The Pound is currently at 81.74 Pence per Euro after going down to the weakest level of 81.81 Pence per Euro (This marks the lowest figure for the currency against Euro since 1st May) right on today. However, Pound, also known as Sterling was more or less unchanged against USD. 1 Pound currently costs $1.6171.

Incidentally, the outlook of Standard & Poor on the AAA credit of Great Britain has already been lowered down to negative from stable on 13th December. The debt profile of the country is getting worse and the economic growth is consistently weak – these two reasons were given by Standard & Poor while announcing its decision.

The 10-year old British gilts saw a rise of 0.01% point and are at 1.89% now. On the other hand, the 1.75% bond due in September 2022 went down by 0.045 and is at 98.765 currently. Incidentally, on 21st December, the 1.75% bonds saw a decline of 7 basis points. The 2-year gilt gained 0.34%. The gilt market will resume the regular operations on 27th December.