British Pound: Still Weak But Losses are Becoming Limited

Even though the British pound sold off against every major currency today with the exception of the Australian dollar, the losses against the US dollar are becoming limited.

We believe that a bounce at this point is very likely especially given the spike bottom on Friday, but any bounce should be seen as an opportunity to add to short positions because UK fundamentals are deteriorating by the day. According to Rightmove, the average asking price of UK homes fell 0.7 percent in November. Their commercial director recommends that ``If you have to sell, then seriously consider dropping your price and taking an offer now rather than holding out.” This is certainly not a favorable market for the UK home owner and we expect these conditions to be reflected in the overall economy in the months to come. Money supply, mortgage approvals and the CBI industrial trends survey are due for release tomorrow. Inflation could still be high, but mortgage approvals and CBI industrial trends could deteriorate.
[B]Written By Kathy Lien, Chief Currency Strategist for[/B]