Pound Declines on Real Estate Pessimism

The pound started the week losing versus most of major traded currencies around the world as speculations suggested that the crisis in the real estate sector will continue in 2010, decreasing attractiveness for the U.K.’s currency in foreign exchange markets.
After Ernst & Young LLC’s Item Club statements declaring that house prices in the U.K. will continue to decline next year, the sentiment towards the British currency was affected, making the pound to decline versus most of the 16 main traded currencies, as the real estate market crisis in the country was one of the main factors behind the biggest economic slump in the U.K. since the Second World War. The pound reached a one month high versus the U.S. dollar last week as optimism spread out in trading markets, but domestic complications once again affected U.K.’s currency, which is failing to climb to pre-crisis levels, as stocks declined in London this morning, shunning investors from pound-priced assets.
Analysts remain cautious to state a recovery for the British currency, as domestic data remains rather negative, influencing traders sentiment towards the pound, suggesting that at least in the short-mid term U.K.’s currency will still be not one of the best bets in foreign-exchange markets.
GBP/USD traded at 1.6543 as of 10:33 GMT from a previous rate of 1.6652 when markets opened. GBP/JPY fell to 150.14 from 150.56.

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