The outlook for the British pound deteriorates by the day.
Third quarter GDP was weaker than expected with growth increasing by only 0.7 percent compared to the market’s 0.8 percent forecast last quarter. The housing market also remains weak with BBA mortgage approvals falling to a record low. This prompted Bank of England member Lomax to warn that monetary policy may be restrictive which suggests that rate cuts are on the minds of UK policy makers. The recent deterioration in UK economic data and the dovish Quarterly inflation report has traders now pricing in 75bp of easing by the middle of next year. We do not expect next week’s housing data, CBI distributive trades survey and consumer confidence to be much of a help as the currency looks poised for further losses.