Market Report

The pound may decline for a second day on evidence house-price growth in the U.K. is slowing, fueling speculation higher borrowing costs are starting to cool the property-market boom.

The U.K. currency slipped from its highest since June 1981 against the USD after a report yesterday showed property prices in Britain rose at the slowest rate since January 2006 last month.

Today's key economic releases in the US are the June retail sales report and data on June import prices, both at 12:30 GMT.

Have a great wekend.

VC

With Sterling hitting 26 year highs against the Dollar and the Euro reaching the highest its ever been against the Dollar, expectations of what will happen next are as predictable as the British Summer.

The weakness was in part down to better than expected UK trade defecit figures released yesterday, this was in addition to concerns amid the US & Asian sessions that the damage from the of woes of the sub-prime mortgage market could spread further into the wider economy, providing more uncertainty around the strength of the US economy and the direction of its monetary policy, which for the moment is firmly stuck between FED deicions to hold or cut interest rates right through to 2008.

Todays markets are fairly light on data that will provide much strength for the Dollar, other than the forecasted lower level for the UK RICS house prices survey out at 11:30 tonight, my expectations are that the weakness will continue throughout the European and early US sesions, with Sterling & the Euro reaching all times against the Dollar.

DD

Sterling held above $2 for the eighth consecutive trading day on Tuesday, supported by a survey showing accelerating British retail sales growth which backed expectations for further interest rate hikes. The British Retail Consortium said retail sales growth picked up to an annual 3.0 percent in June despite poor weather.

The Bank of England last week raised British borrowing costs for the fifth time since last August to 5.75 percent -- leaving them some 50 basis points higher than the Federal Reserve's benchmark funds rate and increasing the pound's yield appeal. With the highest interest rates in the Group of Seven nations, sterling has benefited from investors making carry trades, where low-yielding units like the Japanese yen are sold for higher return assets.

British trade data is due at 0830 GMT, with Britain's goods trade deficit expected to have widened to 6.6 billion pounds in May. Investors will be keeping an eye out for any signs that the strong pound is affecting exports.

Monetary Policy Committee member Andrew Sentance, seen as one of the hawks on the Bank's rate-setting committee, is due to speak later in the day.

DH

As expected last week we saw Interest Rates increased in the UK to 5.75%, and in the Euro zone rates were kept on hold. This only helped the strength of Sterling and the Euro against the Dollar, with the Euro close to a record high and Sterling the highest it has been in 25 years.

On Friday we saw better than expected Non-Farm Payroll figures from the US which helped the Dollar recover a little.

The highlights for the week ahead are the Retail sales figures and the Michigan consumer sentiment both from the US on Friday. From Europe we have Industrial production on Thursday, and ECB President Trichet speaking on Wednesday.

The England Cricket team decided to disappoint again, with a dismal display on Saturday. At least the weather did not disappoint this weekend, but how long will it last!?

DE

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