British Pound Pares Gains after Sharp Rise on Friday

After coming within 5 pips of 2.05 at the onset of the European trading session, the British pound reversed course to end the day lower against the US dollar. Like companies in the Eurozone, companies in the UK are also being hurt by the recent strength of the British pound.

Like companies in the Eurozone, companies in the UK are also being hurt by the recent strength of the British pound. Last Friday, Tate and Lyle PLC warned that earnings could be weak over the next six months as a direct result of the dollar?s weakness against the British pound. If economic data continues to surprise to the downside this week, expectations for a surprise rate cut on Thursday will grow. Prime Minister Brown said this morning that they will take no risks with the economy. After harsh criticism last month on his response to the Northern Rock problems, Bank of England King probably feels the same way.

Written by Kathy Lien, Chief Currency Strategist for DailyFX.com