gbp fundamentals

British Pound Consolidates Massive Losses - Recovery in Store?

Friday, 10 October 2008 21:31:01 GMT  |  Terri Belkas, Currency Strategist

The British pound held to a range of 1.6900 - 1.7150 on Friday, holding up fairly well versus the dollar compared to currencies like the euro, which plunged.

For once, the UK is looking to be somewhat ahead of the curve as they have enacted aggressive policies meant to stabilize the markets. Though it did not prevent the FTSE 100 from falling, as the index closed down 8.85 percent, the UK government announced plans on Wednesday for a 50 billion pound strategy to partly nationalize at least eight British banks. Furthermore, UK Chancellor of the Exchequer Alistair Darling proposed that nations should guarantee lending between banks, either by turning central banks into clearing houses for the loans or having governments back them. The suggestion has not been ruled out by Treasury Secretary Henry Paulson, which may signal that the plan could actually be enacted. Next week on October 14, the September reading of the UK Consumer Price Index is forecasted to accelerate to an annual rate of 5.0 percent from 4.7 percent, as is also anticipated by the Bank of England. While these expectations did not stop them from cutting rates on October 8 by 50bps to 4.50 percent in a coordinated effort with central banks like the Federal Reserve, European Central Bank, and Bank of Canada, among others, stronger than expected CPI results could lead the British pound could rise. On the other hand, a weaker than forecasted result could weigh on the currency.

Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.

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