U.K. Home Prices Slip to Multi-Decade Low, Fueling Recessionary Fears

Fundamental Headlines

• AIG Bailout Hit by New Cash Woes – Wall Street Journal
• Wachovia Talks Snag Over Division of Its Assets – Wall Street Journal
• IBM lifted by $2.8bn profit – Financial Times
• Iceland's FSA Takes Over Kaupthing as Economy Nears Collapse – Bloomberg
• U.K. to Inject About $87 Billion in Country's Banks – Bloomberg

• GBPUSD – The downturn in the U.K. housing market just got even worse as the HBOS house price index slipped to a 25 year low of -12.4% from -10.9% in August, which suggests that home values may continue to fall throughout the rest of the year. Indeed, the intensification of the credit crisis has led central banks all over the globe to lower their respective benchmark interest yesterday, but the lack of recovery in the credit sector may continue to drive home prices lower as mortgage lenders hoard their cash. Meanwhile, the U.K. trade deficit inched lower to GBP -8.198B from a revised reading of GBP -8.238B in July, but continues to hold near the record high as export demands from the global economy wavered. The report showed that exports declined 4.5% while imports slipped 3.4%, signaling that Europe’s second largest economy may have slipped into a recession in the third quarter. Discuss the topic and your trade ideas in the GBP/USD Forum.

• EURUSD – German wholesale prices fell for the second straight month in September, indicating that falling commodity prices have certainly helped to limit upward price pressures. The report showed that prices slipped 0.6% after falling 1.8% in the previous month. Meanwhile, the annual rate rose 5.8% as widely expected, and suggest that the ECB may have more room to lower rates in the near future as upside inflation risks subside. Meanwhile, The trade surplus in Germany narrowed to 10.0B from a revised reading of 13.8B in July, signaling that the slowdown in the global economy may continue to limit growth in Europe’s largest economy. In fact, a breakdown of the report showed that exports fell 0.5% amid expectations for a 0.2% gain, while imports fell 2.5% despite forecasts for a 3.9% decline. Cooling inflation paired with a dimmed outlook would only increase pressures for the ECB to lower the benchmark interest further as the economy is on the brink of a recession. Discuss the topic and your trade ideas in the EUR/USD Forum.

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