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Like the Eurozone, UK economic data continued to weaken, but that has not stopped the British pound from staging a very strong rally.

The strength in the sterling may be due to the news that HBOS PLC announced a GBP4 billion rights issue that is aimed at helping the bank bolster its balance sheet.  However we are still worried about the outlook for the UK economy and for that reason we are also skeptical about the move in the British pound. Gfk Consumer Confidence figures declined to a 16 year low as fear of a recession and a depressed housing market continued to worry locals.  Looking ahead, PMI manufacturing is expected to decline as similar weakness has been seen in the CBI survey.