British Pound Trading Near 2.05

The British pound continued higher today and came within a whisker of 2.05 despite weaker consumer confidence and news that Northern Rock borrowed another GBP5 billion from the Bank of England.

The UK banking sector is still in trouble, but this seems to matter little for traders who are obsessed with selling US dollars. However these problems raise the risk of a surprise interest rate cut from the Bank of England next week. The BoE is notorious for catching the market off guard and given the continued problems at Northern Rock, they may feel the need to ease monetary policy. Aside from the BoE meeting, we are also expecting manufacturing and service sector PMI data.

Written by Kathy Lien, Chief Currency Strategist of