London, June 6 (BNA): The pound sterling fell today, Tuesday, as data showed that British homebuilding melted in May, and that the dollar stabilized.
The pound sterling last fell 0.18% to $1.241. The euro settled against the British pound at 86.18 pence.
According to Reuters, survey data showed that home building in Britain fell at the fastest pace since May 2020 last month as builders struggled with rising interest rates.
The construction sector’s headline Purchasing Managers’ Index (PMI) survey came in at 51.6 in May, above the 50 mark indicating growth and up from 51.1 in April.
However, the title hid the disparity within the construction sector, with commercial and civil engineering activity rising but homebuilding struggling.
Chris Turner, ING’s head of markets, said in a research note that Britain faced a “mortgage time bomb”, with more than 600,000 mortgage holders refinancing at higher rates in the next six months.
Turner said this could lead to the Bank of England (BoE) raising interest rates less than markets expect. Traders currently expect interest rates to rise to around 5.4% later this year, from 4.5% currently.
Sterling rose to a one-year high of $1,268 in mid-May as inflationary pressures remained strong – making further BoE rate hikes likely – and the outlook for the UK economy brightened somewhat.
It has since fallen as the dollar found favor among investors due in part to concerns about facing the now-resolved US debt ceiling and in part due to strong US labor market data.
The dollar index – which tracks the greenback against six peers – rose 0.15% to 104.15.
M