The U.S Downturn Will Cut Britain's Economic Growth

The U.S Downturn Will Cut Britain's Economic Growth

Daily Forex Fundamentals | Written by Finotec Group | Apr 22 08 08:50 GMT |

Existing home sales figures are out today in the U.S and will play a major role in the currency markets as traders look to see what effect it will have on the greenback, currently trading at $1.5870 against the euro and 103.09 against the yen at 7:30 GMT. Home sale figures Measure the annualized number of existing residential buildings that were sold during the previous month. A rising trend has a positive effect on the nation's currency because large purchases tend to be made by consumers that are optimistic and confident in their financial position. U.S. sales of previously owned homes probably fell in March as loan restrictions and the prospect of further price declines kept buyers away, economists said before a report today. The National Association of Realtors may report that home resale's dropped 2.3 percent to a 4.92 million annual rate, nearing the lowest level since 1999, according to the median forecast of 72 economists in a Bloomberg News survey. Defaults on subprime mortgage loans have led banks to tighten borrowing rules, while home values are dropping as foreclosures add to the glut of unsold properties. The housing slump, now in its third year, is one reason some Federal Reserve policy makers are concerned the U.S. is heading into a recession. 'Consumers don't want to jump in to buy a house when it looks like prices are in a downswing,' said Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. 'It wouldn't surprise me if disappointing reports on home sales stretched on for another six months or so.' Yesterday the Bank of England decided to lend Britain's cash strapped banks £50billion which was the biggest ever financial bail-out backed by the government. The bank plans to swap lenders mortgage debts for safe government bonds in a bid to ease the effects of the credit crunch. Initial take-up of the scheme is expected to be £50billion but there is no cap on it. Owing to the global financial turmoil, banks are reluctant to lend to each other, meaning fewer mortgages and less credit is available for customers. It is hoped the asset-swap will help banks to start lending again. Chancellor Alastair Darling yesterday said the credit crunch was the most serious shock to the markets for generations. But later told MP's: 'The UK financial system remains fundamentally strong and the Bank of England's action has helped take some pressure out of the system by giving the banks additional liquidity to continue their usual banking operations' He said the scheme would protect tax-payers as banks would pay the commercial interest rate for using the service. Despite Mr. Darling's words, the London Stock Exchange closed 14 points down although analysts hailed the bail out as cause for hope. Vicky Redwood of Capital Economics said it was the biggest measure yet taken by any country's central bank. Meanwhile, the international Monetary Fund warned the U.S downturn would cut Britain's economic growth. GBP/USD currently trading at 1.9775 at 8:00 GMT Economic Calendar Time Country Event Period Previous Forecast Significance 23:50 Trade Balance JPY Mar 970.0b ** 14:00 Existing Home Sales USD Mar 5.03M 4.96M *** 14:00 Richmond Fed Index USD Apr 6 ** 13:00 Interest Rate Statement CAD Apr 3.50% **** 11:50 Trade Balance JPY Mar 0.9% ** 06:15 Trade Balance CHF Mar 1.55B ** Finotec Group Inc. http://www.finotec.com/ Source : Actionforex.com