British Pound Fails at 1.66 as UK Rate Expectations Slip Lower

The British pound joined the low-yielding US dollar and Japanese yen as the weakest of the majors on Friday, with GBPUSD failing to break above 1.6600, as interest rate expectations for the UK continue to fall. Indeed, Credit Suisse overnight index swaps are now pricing in 86.1 basis points worth of hikes by the Bank of England over the next 12 months, compared to 124 basis points two weeks ago. While there was no UK data on hand on Friday, traders may have kept in mind Thursday’s news, as the UK government posted a deficit of 8 billion pounds in July, the biggest since recordkeeping began in 1993, highlighting the dour state of the nation's finances. Standard & Poor's lowered its outlook on the UK's AAA credit rating to “negative” from “stable” in May for this very reason, and if we see this trend continue, the risk for an actual downgrade will grow and put greater pressure on the British pound. Next Friday, the UK will also face a second round of growth results, but Q2 GDP is not anticipated to be revised from previous estimates of a 0.8 percent quarterly contraction and a 5.6 percent annual contraction, the worst since recordkeeping began in 1955.

source:-.dailyfx.com