British Pound Extends Weakness

The British pound continued to weaken against both the Euro and US dollar despite slightly stronger UK economic data. Second quarter GDP was right in line with expectations on a quarterly basis, but the annualized figure was revised up from 3 to 3.1 percent.

The current account deficit also narrowed from -GBP11.5B to -GBP9.1 billion. The continued to bearishness in the pound particularly against the Euro is a direct result of concern for the UK banking sector. According to the Bank of England?s Q2 to Q3 credit conditions survey, 49.3 percent of lenders are expected to cut credit supply over the next 3 months compared to 20.2 percent. Nationwide house prices are due for release tomorrow along with consumer confidence. Both are expected to deteriorate modestly.

Written by Kathy Lien, Chief Currency Strategist of