The Bank of England meeting was a big yawn as interest rates were left unchanged at 5 percent.
The lack of a surprise statement or a rate cut came as a relief to some pound traders who were hoping for the impossible – a proactive move by the BoE. Historically, the BoE has been a very dynamic central bank that keeps the market guessing, but after Mervyn King fell behind the curve in responding to the credit crunch in August 2007, he hasn’t quite caught up. The British pound did end the day lower against the Euro and US dollar, but that was largely due to selling at the London open. The UK housing market continues to be the Achilles Heel of the UK economy. Mortgage lender Halifax report a 6 percent drop in house prices compared to a year ago, which translates into a 2 percent drop from the pervious month. Similar to the conditions in NY, the housing market is closely tied to the labor market. When the layoffs in financial sector finally hit, the housing market could deteriorate even further.