Business | Economy
Dollar falls against European currencies
The euro hit an all-time high against Britain's pound sterling on Wednesday as traders factored in expectations of an imminent cut in UK interest rates.
- AP
- Published: 00:28 April 10, 2008
London: The euro hit an all-time high against Britain's pound sterling on Wednesday as traders factored in expectations of an imminent cut in UK interest rates. A fresh report of sagging consumer confidence also weighed against the pound.
The euro bought 80.005 pence in early trading, its strongest level since the European currency was introduced in 1999. By mid-afternoon the euro eased to 79.85 pence. The pound was worth $1.97 yesterday afternoon, fractionally higher than late Tuesday.
Many analysts expect the Bank of England to announce today that it will cut its base lending rate to five per cent from the current 5.25 per cent.
Credit has tightened in Britain in the fallout from the subprime mortgage crisis in the US, and UK mortgage lenders have become more selective while withdrawing loans for the full purchase price of a property. Britain's formerly booming housing market has stalled, with house prices dropping 2.5 per cent in March according to a report on Tuesday from the Halifax, a major mortgage lender.
Consumer confidence
Consumer confidence in Britain fell for the sixth straight month in March, the Nationwide bank reported yesterday. The report said its index fell to the lowest level since the monthly surveys began four years ago.
Only 14 per cent of those surveyed thought the economy would be better in six months' time, the Nationwide said.
"The downturn in consumer confidence over the last six months is not surprising given developments in the financial markets and a weakening housing market," said Fionnuala Earley, the bank's chief economist.
"The effect of recent interest rate cuts has yet to trickle through to people's pockets, particularly as food and energy costs are still high. Consumers may begin to feel more comfortable following the expected cut to rates this week, but it is unlikely that confidence levels will increase in the short term," Earley said.
A report from the Office of National Statistics said that output of production industries in the December-February quarter was unchanged from the previous three months.
Manufacturing output was up 0.3 per cent but mining and quarrying output was down 3 per cent.
Treasury chief Alistair Darling announced that he had appointed Sir James Crosby, deputy chairman of the Financial Services Authority, to head a working group to find ways to reopen the mortgage market.
"We need to do everything we possibly can to help people through what is undoubtedly a difficult period," Darling said in a BBC interview.
"The basic problem you have got at the moment is the banks and the building societies have found funding harder to raise because of what is happening in the financial markets generally." Richard Lambert, director general of the Confederation of British Industry, said he also believed the Bank of England would relax its rules on lending.
"The bank is thinking about other steps, which means basically lending money to banks on longer terms than it normally does and against the security of a wider range of assets than it would normally accept as collateral," Lambert told the BBC.
"It is fiendishly difficult for it to do, because it has to get the money in the right place, in the right hands, but that is what it is working on."
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