Pound Drops as Britain in Recession

The Great Britain pound weakened as the United Kingdom entered recession, bolstering the case for the Bank of England to ease its monetary policy further to aid the struggling economy.
Britain’s gross domestic product shrank 0.3 percent in the first quarter of 2012, with the same rate as in Q4 2011. Two consecutive quarters of deteriorating GDP means the economy has entered recession. Other economic indicators were also bad. The Nationwide House Price Index unexpectedly fell 0.6 percent instead of rising 0.3 percent as was expected. The current account deficit widened from £11.2 billion in Q1 2012 from £7.2 billion in the previous three months, being more than economists anticipated.
The European summit had a mixed impact on the sterling. It allowed the currency to rise versus the euro, but pushed the pound lower against safer currencies. The UK currency tends to profit from problems in European countries, but Britain’s recession made the sterling much less attractive.
GBP/USD was at about 1.5521 as of 00:47 GMT today after falling from 1.5567 to 1.5517 yesterday. GBP/JPY fell from 123.27 to 123.09 today. GBP/CHF traded at 1.4978, following the drop from 1.4994 to 1.4975.

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