Traders continue to push the British pound lower against the US dollar.
Since last Wednesday, the currency pair has fallen close to 300 pips. Despite modest rebound in house prices in May according to DCLG, business confidence continues to suffer. The British Chambers of Commerce reported that business optimism plummeted in the second quarter. The UK trade balance is due for release tomorrow and like the German numbers, we expect them to be pound bearish. Last month, manufacturing PMI fell to the lowest level since 2001. The export orders component of the report also deteriorated, which is why we believe that the UK trade deficit will continue to grow. As the Bank of England’s monetary policy meeting approaches, more people are talking about the possibility of a rate cut this year. Recent data indicates that the UK economy is in serious trouble and a recession could be right around the corner.
