The British pound was strong versus the US dollar during the European trading, but subsequently fell over 200 points throughout the afternoon as the greenback surged and jittery investors sold off risky assets.
Looking at the data on hand from the UK, there was little reason for traders to buy Cable from a fundamental perspective. Indeed, jobless claims rose for the eighth consecutive month by 31.8K in September to 939.9K, the highest level since November 2006. The deterioration in the labor markets is both an indication of gloomy outlooks by employers as well as a signal that UK recession risks loom large as consumption may contract significantly in coming months. As a result, the Bank of England is expected to cut rates multiple times over the course of the next year, despite the fact UK CPI remains well above the BOE’s 2 percent target at 5.2 percent, as the central bank will be willing to bet that the economic slowdown will cool inflation pressures on their own. The prospects for rate cuts should be enough to weigh on GBP/USD, but unfortunately for those that like to trade based on fundamentals, price action in the forex markets continues to be driven by risk trends. Related Article: British Pound/US Dollar Exchange Rate Forecast Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.