LONDON: Sterling edged down against a buoyant dollar on Monday after data showed British mortgage approvals fell more than expected in August, adding to signs that the housing market is coming off the boil.
The Bank of England, which has been taking steps to cool the property market, said there were 64,212 mortgage approvals last month, the weakest figure since May.
Earlier this year, BoE Governor Mark Carney said housing was the biggest domestic threat to Britain's economic recovery, given the risk of borrowers taking on too much debt.
"The BoE might be quite happy that the housing market has consolidated a little bit; it makes worries about financial stability a bit less troublesome," said Paul Robson, a foreign exchange strategist at RBS.
He said the numbers would be unlikely to have a direct effect on the path of BoE policy on interest rates. But it did highlight the challenge the bank faces of not acting too aggressively to curb growth in aid of warding off any threats of a housing crash.
"The numbers today highlight the dilemma for the BoE," Robson said.
Sterling has been buffeted in recent months by swings in expectations for when the BoE would raise rates from their historic lows. Carney said last Thursday that a move was "getting closer", due to Britain's improved economic outlook, but that the exact date of the first hike would depend on data.
Sterling inched down 0.1 percent against the dollar - which earlier hit a four-year high against a basket of major currencies - to $1.6228, from around $1.6240 before the data release.
The euro was flat against the pound at 78.110 pence , not far from a two-year low of 77.855 pence hit on Thursday. Analysts said it could be set to weaken further.
"With Governor Carney sounding more hawkish last week, we see further downside to euro/sterling as monetary prospects diverge," said Petr Krpata, a currency strategist at ING, in a research note.
Final gross domestic product (GDP) numbers due on Tuesday are expected to show the UK economy grew by 0.8 percent between April and June - the same rate as in the first quarter.
Comments
Comments are closed for this article.