US Housing market slows as Sterling Flirts with 2 Dollar pound.

Overseas property investors buying in the US or in countries that have currency pegged to the Dollar will have kept a keen eye on the foreign exchange markets last week . Sterling flirted with the $2 Dollar level, at one point dropping back to $1.9925. On Thursday 28th June 07 a more serious attack took it above that resistance level and on Monday morning it touched above $2.01.

The US residential property market continued to demonstrate its usual weakness with a slowdown in the number of sales and price levels two per cent down from a year ago. Whilst the Federal Open Market Committee does not attach too much concern to the housing market it does take it into account. This perhaps explains why, when the FOMC left US interest rates unchanged at 5.25 per cent last week, the wording of its statement was a little softer than usual. Even so, the punch line remained the same; "The Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected."

Having cracked the $2 level for the second time this year the big question is whether, this time, it will be able to hang onto that elevated position. History is against it but the Dollar is in the doldrums and the Euro is pushing above its own bogey-line at $1.35. The test will come on Thursday with interest rate decisions from both the MPC and the European Central Bank. Depending on the mood of the market at the time, European hawkishness could either reinforce belief in the right of Sterling to stay above $2 or simply put a full stop to the list of reasons to buy it. The real risk is that those who bought the mystery of rising UK interest rates will sell the history after it has happened.

Buyers of the Dollar may well be able to buy more cheaply in the future but should get at least some on board now, to avoid the potential embarrassment of missing it if the Pound drops back.

FX dealers such as Moneycorp can give specialist advice for both individuals and corporate clients.

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