Monday in Asia, the pound plummeted to more than a 1-year low against the Swiss franc and new multi-day lows against the rest of majors following a Confederation of British Industry report showed that the recovery in the U.K. economy is expected to remain sluggish during 2010.
In its latest economic forecast, the CBI said the economy will grow in the first two quarters of 2010, by 0.3% and 0.4% respectively, and by a slightly faster 0.5% in the next two quarters. The CBI forecasts annual GDP growth of 1% in 2010, followed by 2.5% in 2011.
Richard Lambert, CBI Director-General said, “The economic outlook is improving, but the lack of a clear driver for growth will make for a bumpy ride in the months ahead. The CBI expects the recovery in 2010 to be slow and sluggish, with few signs of real strength until well into next year.”
The pound has been under pressure since Friday after the Bank of England policy maker Andrew Sentance said in an interview that the nation may return to recession and that the country will need a “substantial” fiscal tightening.
The pound tumbled to 1.5864 against the Swiss franc by 11:45 pm ET Sunday, the weakest level since March 10, 2009. The pound-franc pair, which finished Friday’s trading at 1.5928, is presently worth 1.5878 and sliding below the 1.5850 support may pull the pair down to its lowest level in 14 months.
Against the US dollar, the pound slumped to a 12-day low of 1.4942 by this time, down by more than 0.5 percent from last week’s closing quote of 1.5019. The pound-greenback pair is presently worth 1.4962 with 1.4870 seen as the next likely support level.
The pound plunged to an 11-day low of 135.15 against the Japanese yen around 11:50 pm ET, compared to 135.93 hit late New York Friday. On the downside, the pound-yen pair may test support around the 133.80 level. Currently, the pair is quoted at 135.35.
The pound depreciated by more than 0.3 percent to reach a 5-day low of 0.9045 against the euro around 12:00 am ET from last week’s close of 0.9016. If the UK currency weakens further, it may find support around the 0.9070 level. The euro-pound pair is presently quoted at 0.9037.
There is no first-tier economic data to consider from the Europe and US on Monday, leaving traders to ponder the UK consumer price index and retail price index-both for the month of February, which are slated for release on Tuesday.