Concerns that Bradford & Bingley’s financial problems could send the UK credit and housing markets reeling have clearly died out over the past 24 hours; but the damage has already been done with the pound now consolidating nearly 200 points below the week’s open. A few notable economic indicators have crossed the wires through Tuesday’s session. In early London trading, the construction activity indicator from the Chartered Institute of Purchasing and Supply sank more quickly than expected.
In fact, according to the indicator activity contracted the most since records began 11 years ago. This indicator follows the already severe decline in home prices and mortgage applications and further confirms that the UK housing sector is in the same situation as its US counterpart – just nine months back. Much later in the day, the Nationwide consumer confidence survey for May crossed the wires with its own disparaging air. The sentiment report similarly hit record lows (this one going back to 2004) as Brits responded to evaporating home values, rising lending costs and soaring inflation. For Wednesday’s session, the PMI services and BRC consumer inflation reports will struggle to rouse volatility from the pound with most fundamental traders looking ahead to Thursday’s BoE rate decision.