ForexGen Analysis Of BRITISH POUND BREAKS

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BRITISH POUND BREAKS 1.75

The British pound quietly trended lower today and broke 1.75 following the RBNZ rate decision. UK economic data continues to spell trouble for the pound with the GDP estimate coming in at -0.2 percent for the month of August and the visible trade balance widening more than expected. Like the ECB, the Bank of England is probably enjoying the benefits of a weaker currency. Without having to worry about rising oil prices, the sell-off in the British pound should help to support the UK economy. However despite any contribution, we continue to believe that the UK economy is headed for a recession and as a result, the Bank of England will cut interest rates by 50 to 75bp next year. Problems in the US financial sector have led to a reduction of risk around the world. As one of the largest financial centers UK investments will certainly be affected.

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