Fading Strength in the British Pound
The British pound had a nice rally last week, but the strength of the currency pair is fading.
Unlike many of the other major currencies, the British pound failed to hold onto its gains against the US dollar. Housing market data from the UK continues to disappoint with consumer credit and mortgage approvals falling short of expectations. Nationwide house prices are due for release tomorrow and we expect this housing market indicator to continue to reflect the overall vulnerability of the sector. Despite the backlash that he received for his delayed reaction to the August credit crunch, Bank of England Governor Mervyn King has been appointed to a second five year term as the head of the central bank. Despite the fact that we expect the dollar to continue to weaken against most of the major currencies, the British pound could actually underperform both the Euro and US dollar. We also think that a possible top is in place at 1.9950 in the British pound.