British Pound: Understanding the Moves

The British pound hit a high of 1.4605 this morning after falling to a low of 1.4137 yesterday. Although we have a mild improvement in risk appetite that is helping to propel the GBP, CAD, AUD and NZD higher, 2 stories making the wires are responsible for the volatility in the British pound.

Story #1 : Darling to Get Attacked Over Sterling Slide

The main story behind the British pound rally during the early European trading session was talk that European finance ministers will be attacking UK Chancellor Darling over the sterling’s slide. Over the past 6 months, the British pound has fallen more than 20 percent against the Euro and close to 30 percent against the US dollar. The most dramatic slide has been seen in GBP/JPY which dropped 55 percent.


Story #2: HBOS Expected to Report a GBP10 billion Loss Before Taxes

However some of the gains in the British pound were erased beginning around 8:40am this morning after news broke that Lloyds Banking Group expects HBOS to report a GBP10 billion before taxes. Remember that the UK government owns 43% of Lloyds so a loss for Lloyds means a loss for UK taxpayers.

Impact on British Pound

The threat of criticism at the G7 meeting should limit any further losses in the British pound. However, once the G7 meeting is over, we could see short term weakness in the pound. The Quantitative Easing that the BoE is expected to undertake should drive EUR/GBP towards parity.

About Kathy Lien 235 Articles

Kathy Lien is an Internationally Published Author and Chief Strategist of, one of the world’s most popular online websites for currency research. Her trading books include the highly acclaimed, Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley); High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia); and Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, the research arm of FXCM. She also co-edits the BK Forex Advisor, an Premium Service with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the 2 Trillion/day FX market.

Kathy is also one of the authors of Investopedia’s Forex Education section and has written for, the Asia Times Online, Stocks & Commodities Magazine, MarketWatch, ActiveTrader Magazine, Currency Trader, Futures Magazine and SFO. She is frequently quoted by Bloomberg, Reuters, the Wall street Journal, and the International Herald Tribune and has appeared on CNN, CNBC, CBS and Bloomberg Radio. She has also hosted trader chats on EliteTrader, eSignal and FXStreet, sharing her expertise in both technical and fundamental analysis.

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