By TraderVox.com
Tradervox.com (Dublin) – The sterling pound dropped against the euro for the first time in three days after house prices dropped by 0.1 percent in August, registering a similar drop to the previous month. The drop in home value has spurred speculation that Bank of England will make additional bond purchases to boost economic growth in the Kingdom. However, the pound increased against the US dollar despite the report from Hometrack Ltd released yesterday. The country’s gilts advanced as reports from Spain showed the recession is worsening as Catalonia, a rich northeastern region in Spain, asked for aid from the central government, boosting the demand for the pound as safe haven.
According to a Senior Foreign Exchange Strategist in Frankfurt at Commerzbank AG, Lutz Karpowitz, having quantitative easing speculation burdens the currency and such speculations cannot be ruled out following worsening home prices in the country. Home prices have dropped at a time when UK gross domestic product is contracting. In a previous government report released on August 24, the GDP contracted by 0.5 percent. Further, the BOE policy makers have been forced to cut their growth forecast this month and they are open to stimulus program to spur economic growth. Governor Mervyn King has indicated that the central bank will do everything possible to spur economic growth.
The sterling pound dropped by 0.3 percent against the euro to trade at 79.38 pence per euro at the close of trading in London yesterday, when it touched its weakest level since August 7 of 79.55 pence. The UK currency advanced by 0.2 percent against the dollar to trade at $1.5827 after it had lost 0.3 percent in the previous trading sessions. The pound weakened against the yen by 0.1 percent to exchange at 124.26 yen.
The GBP has lost 1.3 percent in the past month according to market survey but UK gilts have gained as Euro zone sovereign debt crisis worsened.
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