With no major economic data released today, the British pound recovered marginally against the US dollar.
Even though the statement released by the Bank of England last week was not as dovish as the market expected, the fear that economic data will deteriorate further and force the Bank of England to continue lower interest rates well below 5.00 percent has prevented the British pound from recovering. Next week there are a lot of UK economic data on the calendar, which means that there will be decent volatility in the pound. We are expecting producer prices, consumer prices, trade balance, employment data and the Bank of England Quarterly Inflation Report. Inflation should be strong, but the labor market is expected to deteriorate further given the strains in the housing and financial markets.
