UK Currency Rally
The sterling was on course to peak at a year long high against the dollar this evening, shortly before the close of the markets. The pounds sudden rise came on the back of data showing new mortgage loans were up for the month of August, suggesting that the UK economy could finally be on the road to recovery after almost half a decade in recession.
The dollar was not the pound’s only victim as it also made strong gains vs the yen, encouraged by the news of regulations for the bailout fund for Europe being agreed. The regulations seem to imply that the fund will not just be used to purchase debt but also a rather wide selection of assets and bonds, should the situation require it.
Less than a week ago the UK GDP contracted, beating expectations quite clearly. This improved sentiment in the UK alone but this latest piece of good news is expected to rally the markets and currency over the next few days, much in the same way that improved job data from July rallied the US economy earlier this year.
The pound gained 0.2%, reaching $1.6239 shortly before the markets closed. The currency was fairly well matched by the Euro, which also had a strong day, resting at 79.74p to the euro.
New mortgage’s were above 30,000 for the month of August, rising by more than 1,500 in the 30 day period, which when combined with the deficit falling to £14bn represents significant signs of economic growth in the region.
Bank of England to push funding for lending
It was confirmed today that the Bank of England would potentially be offering more than £60bn to creditors and lenders across the country for them to offer loans to consumers and small business. The unprecedented move has been put into action in an attempt to offset any potential negative effects from the current crisis taking place in the Eurozone. The British economy itself is still in a state of recovery after falling into a double dip recession. The BoE hope this scheme will ensure any progress made is not lost due to the problems on the continent.