Forex Market Update: British Pound Pares Decline, Breaks Above 1.61

[B]GBP surged higher in early Europe[/B], which enabled Cable to successfully clear 1.6100 offers and extend to 1.6147 highs, while EUR/GBP continued to head lower and traded at 0.8622 lows. U.K. data released overnight was a mixed bag, with house prices showing continued improvement, but retail sales and hiring intentions remained soft. Firmer equity markets have been supportive, with long term traders still betting on resurgence in the pound due to its strong correlation with equity markets and the financial sector generally. U.K. PM Brown’s future remains tenuous, but for now he has successfully overcome the recent criticism over his leadership. Most market participants accept that Brown will go at some point, but any negative reaction has provided an opportunity for corporate accounts and real money to load up on more sterling. M&A related flows may also be providing some help to sterling following news yesterday that Barclays is in possible talks with U.S. money manager Blackrock for the U.K. name’s asset management arm