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British Pound Under Pressure as Risk Appetite Fades
Monday, 12 January 2009 20:52:11 GMT  |  Terri Belkas, Currency Strategist
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The British pound has retraced more than 50 percent of the rally we saw last week, as lingering risk aversion weighs on some of the more volatile currencies. Meanwhile, the British pound also fell back against the euro, and further losses may be in store.  This is naturally more in line with the fact that the Bank of England cut the Bank Rate to the lowest level since the bank was founded in 1694, but we also saw that while the Monetary Policy Committee’s (MPC) subsequent policy statement was quite bearish on economic conditions in the UK and abroad, they did not give any indication that they would cut rates again during their February 5 meeting. As it stands, actual rate cuts are having little impact on the currency markets, as traders are more focused on comparative long-term interest rate expectations and risk trends. There will be no key UK economic indicators released this week, making it all the more important to watch the latest return of risk aversion, which tends to work in favor of US dollar and Japanese yen strength.

Related Article: British Pound Weekly Outlook


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