Despite an improvement in the trade balance, the British pound also fell victim to the liquidity squeeze. Unlike the Fed and ECB, the Bank of England did not inject liquidity and took no attempts to calm the markets.
The market?s perception of the British pound can be best seen through the currency?s performance against the Euro. Despite a persistently strong currency, the UK trade deficit narrowed in the month of June to the tightest level since October 2005. Unless a UK bank announces fund freezes next, we continue to expect the Pound to outperform the Euro.
[B]Written by Kathy Lien, Chief Strategist[/B]