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BLBG: Pound Falls Versus Euro After Report Says House Prices May Drop
 
The pound declined against the euro as an industry report said that U.K. house prices may fall about 10 percent next year, strengthening the case for further interest rate cuts from the Bank of England.

The British currency also dropped versus the dollar after the Royal Institution of Chartered Surveyors said house prices may fall as much as 30 percent from their highest point as banks ration credit.

“Right now it looks like the market is favoring yields over growth, especially when it comes to the euro and that’s driving euro-sterling higher,” said Geoffrey Yu, a foreign-exchange strategist in London at UBS AG. “All the forecasts for house prices are still falling, U.K. households are over-leveraged, you’re going to see the wealth effects and that’s going to spill over into the real economy.”

The pound slipped to 95 pence per euro as of 4:20 p.m. in London, from 94.57 pence yesterday. It was little changed against the dollar at $1.4740. The currency’s 14-day relative strength index versus the euro was at 24 today, below the 30 level that signals it’s poised to rise.

“It’s a thin market and there are one or two players out there that are trying to chase this move to parity,” Yu said. “There are probably multiple stop-loss levels on the way to parity and they will try to trigger those.”

A stop-loss level is a price that triggers automatic buying or selling put in place by traders to prevent losses.

U.K. government bonds rose, sending the yield on the 10-year gilt down 7 basis points to 3.05 percent. The 5 percent security due March 2018 rose 0.58, or 5.8 pounds per 1,000 pounds face amount, to 115.53. The yield on the two-year gilt dropped six basis points to 1.14 percent.

Source