Pound Falls as Real Estate Crisis Deepens

After rallying to a 10-month high versus the dollar two weeks ago, the pound is declining severely versus most of the main traded currencies, as the real estate scenario deteriorates in the United Kingdom, shunning investors from pound-priced assets.

The most reliable internet real estate portal in the U.K., Rightmove Plc, indicated that house prices in Britain declined 2.2 percent this month, after climbing 0.6 percent in July, a fact which immediately declined attractiveness for the pound, since the real estate sector in the U.K. was the main responsible to plunge the country in its worse recession since the Second World War. Stocks worldwide also declined, pushing investors to safer bets, making the Japanese yen and the U.S. dollar the biggest winners today versus the Great Britain pound, as reports indicate that economic conditions in Europe remain worse than in other areas like in South Pacific and Latin America.

Both international and domestic events are affecting the pound this week, and may plunge it to lower levels in the short term as risk aversion is growing worldwide, at the same time that the British economy is unable to show signs of solid recovery, which push traders naturally away from investing in the country.

GBP/USD traded at 1.6301 as of 11:14 GMT from an opening price of 1.6488 yesterday. EUR/GBP rose to 0.8626 from 0.8595.

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