British Pound Shrugs Off Softer Data

A larger than expected trade deficit and weaker than expected leading indicators in the month of July has mattered little to a market that is focused primarily on interest rate expectations. So far, the downside surprises in UK economic data have not been bad enough to force the Bank of England to take action.

The outlook for the US economy is far worse than the UK economy even though Britons have their own bubble troubles. However tomorrow, the British pound will be in play. Claimant count and average earnings are due for release. The number of people filing for unemployment is expected to drop and average earnings growth is expected to accelerate. An upside surprise in the employment report is worth three times the downside surprises that we have seen thus far. The labor market is a critical part of any economy and if that remains stable, the central bank has far less to worry about.

Written by Kathy Lien, Chief Currency Startegist of