The British pound remains exceptionally weak as the currency reach new record lows against the euro and consolidated above 1.44 versus the US dollar. Conditions in the UK remain dismal, as evidenced by the release of disappointing UK GDP revisions last week, which signaled that the economy actually contracted 0.6 percent during Q3 compared to initial estimates of a 0.5 percent contraction. The GDP figures confirmed that the UK fell into recession for the first time since 1990-1991 as a result of the sharpest drop in consumer spending since 1995 and a decline in investment as the financial crisis took its toll. In a similar vein, the Bank of England’s measure of housing equity withdrawals fell for the second straight quarter during Q3 by 5.7 billion pounds, adding to indications that credit is not readily available nor wanted, which leaves consumption growth likely to fade further. The BOE has already cut rates to 2.00 percent, the lowest since 1951, but this data only adds to speculation that they will reduce the Bank Rate by another 50bps in January.
Related Article: British Pound/US Dollar Exchange Rate Forecast
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