The British pound surged higher on Monday versus the US dollar and Japanese yen, but the move was more of a technical retracement than a fundamentally charged move.
Indeed, economic data was downright dismal, but since the currency has plunged over 13 percent versus the greenback during the past month – the most of the major currencies we follow – it is prone to sharp reversals. Likewise, the pound has been exceptionally weak against the euro, as it has fallen to the lowest levels since the inception of the European currency. Looking at the data on hand, Rightmove house prices plummeted for the fifth straight month by 7.1 percent in November from a year earlier, marking the sharpest decline since recordkeeping began in 2002. On Tuesday, UK CPI will be released and should reflect softer inflation pressures, as the annual rate is anticipated to slip to 4.8 percent in October from 5.2 percent. However, due to the plunge in commodities and waning domestic demand in the UK, there is some downside risk for this particular report, especially since the Bank of England has said that they believe the index will eventually fall “well below” their 2 percent in 2009. As a result, there is potential for this CPI release to weigh on the British pound on Tuesday morning, though its impact may be lessened as the BOE and the markets are more concerned about growth prospects for the region. Related Article: British Pound Could Forge New Lows As Rate And Growth Outlook Fail Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.