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Sterling slips lower

Thursday, July 31 09:42:35

Sterling slipped on Thursday, on track to post its biggest monthly loss against the dollar in over a year, after figures showed some steam coming out of the UK housing market and consumer confidence falling for the first time in six months.

This dovetailed with a broad-based rebound in the dollar, as investors moved to bring forward the timing of a U.S. interest rate hike after figures on Wednesday showed the U.S. economy grew at a solid 4 percent pace in the second quarter.

Comments from BoE policymaker Ben Broadbent on Thursday did little to relieve the pressure on sterling. He told Bloomberg News it was "quite possible" sterling was over-valued by as much as 10 percent, but only because the UK economy was relatively strong.

At 0800 GMT on Thursday sterling was down 0.1 percent on the day against the dollar at $1.6891, and the euro was up 0.2 percent at 79.30 pence.

"UK consumer confidence fell for the first time in six months, which is keeping the lid on any sterling bounce," said Simon Smith, chief economist at FXPro.

Consumer confidence, as measured by researchers GfK NOP, fell in July, and Nationwide's measure of UK house prices showed only a 0.1 percent rise in July, the slowest growth since April last year.

Sterling is now on track for a fourth consecutive weekly decline against the dollar, its worst run since February/March last year, and its biggest monthly fall since May last year.

JP Morgan technical analysts said the selling could accelerate in the coming weeks, noting that the dip below $1.69 on Wednesday was a "strong warning signal that a much deeper setback towards $1.6394 could be looming."

Citi analysts agreed that $1.69 is a crucial pivot point for the pound, but pointed out that despite the softness in recent weeks sterling remains "incredibly resilient in the face of massive dollar strength".

Earlier this month the pound nudged $1.72, its strongest level in almost six years. (Reuters)

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