UK to offer 600m pounds to housing fund

Pound wins holiday from sell-off on resistance to no-deal Brexit

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LONDON:  British finance minister Sajid Javid said he would make 600 million pounds available to support the building of 50,000 new homes by investing in necessary infrastructure, the latest spending pledge by the new government. Javid said the money would go to the Housing Infrastructure Fund which helps to build road, rail links and schools to make an area viable to accommodate more housing.

Javid said the spending would help deliver five new projects in London and in the counties of Essex and Bedfordshire, which are near the capital. “We need the roads, rail links, and schools to support the families living in those homes, which is why I set up a fund to put in place the infrastructure to unlock new homes in these areas,” he said in a statement on Saturday.

Prime Minister Boris Johnson has made a raft of spending pledges since he was elected by Conservative Party members in July, sparking speculation that he will call a national election shortly after Britain is due to leave the European Union on October 31.

At the same time, for Brits looking to escape the UK in an increasingly wet August, the pound might offer some relief with a recovery against the euro. Sterling ended a record run of losses against the common currency this week and analysts are cautiously optimistic on its near-term prospects.

Growing resistance among opposition lawmakers to a no-deal Brexit has led traders to cut the probability of the UK leaving the European Union on Oct. 31, while a lot of pessimism is already baked into the market by fund managers.

Sterling has had a tumultuous few weeks since Boris Johnson succeeded Theresa May as UK Prime Minister, with a promise to deliver Brexit on Oct. 31 “do or die”.

That saw the pound extend its slide against the euro to 14 straight weeks and had fund managers and strategists considering the risk of a plunge to parity against the dollar.

With the pound recovering 2 per cent in the past five days to 91 pence per euro and bouncing above $1.21 after Labour leader Jeremy Corbyn sought rival parties’ support, the market’s bearish view might be coming under pressure, according to Jordan Rochester, a currency analyst at Nomura International Plc.

He sees the odds of Brexit by October at 41 per cent now, from over 50 per cent earlier this month. “The market is clearly witnessing a further position reduction on the Remainer news flows” and this is supporting sterling, Rochester said. The pound remains hostage to the latest random and unpredictable headline from politicians. It seems clear that a vote of no confidence is a positive and the market has now assigned a higher chance of that going through.

Before the latest bounce back, hedge funds and asset managers were continuing to add to short positions, with the latter the most pessimistic on sterling since records began in 2006, according to data up to Aug. 6 from the US Commodity Futures Trading Commission.

There is little time for opposition lawmakers to call a vote of confidence in Johnson after Parliament returns from its break on Sept. 3 to force an election before the deadline, with Corbyn’s proposal to lead a caretaker government also having received a mixed response. It might take an extension to the Brexit deadline to produce an election and provide “some near-term relief” for the pound, said Fritz Louw, a currency strategist at MUFG.                         

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