Like the euro, the British pound rocketed nearly 500 points tough to peak between the Asian and US trading sessions, going so far as to test 1.6100. While the currency has since pulled back, support at 1.5912 has held GBP/USD afloat.
Looking at the data on hand, nearly all economically-related news from the UK continues to point toward recession for the country as PMI Construction fell at the fastest pace in more than 10 years to 35.1 in October from 38.8. The prospects for the UK are so dismal that a Bloomberg News poll shows that economists are expecting the Bank of England to cut the Bank Rate anywhere between 50 and 100bps on Thursday from the current level of 4.50 percent. Credit Suisse overnight index swaps are fully pricing in a 50bp reduction along with an 80 percent chance of a 75bp cut. Given the BOE’s participation in the October 8 coordinated rate cuts, it’s fair to say that the central bank is likely somewhat panicked over what to do from monetary policy standpoint, and as a result, an aggressive 75-100bp cut is not out of the question. Looking ahead to Wednesday, UK industrial production numbers are likely to reflect a decline or stagnation in output for the seventh consecutive month, but as we saw this morning, fundamentals aren’t playing a big role in forex market price action and as a result, traders should keep a closer eye on risk trends and technical outlooks. Related Article: British Pound Forecast Remains Bearish on Bank of England Rate Prospects Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.