The British pound extended recent losses vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.3500 figure and was capped around the $1.3900 figure. Cable reached its lowest level in 23 years as official data confirmed the U.K. economy contracted at its fastest pace in nearly three decades at the end of 2008, pushing the U.K. economy into recession for the first time since 1991. The economy contracted 1.5% in Q4 2008, the largest decline since 1980, and worsened from the 0.6% pullback in Q3. Bank of England will likely be forced to reduce interest rates further in the coming months, possibly as low as zero per cent. For all of 2008, the U.K. economy expanded just 0.7%, the weakest annual growth level since 1992. Some economists now expect the U.K. economy may weaken more than 1.25% in 2009 and employment should top two million this year. Notably, the U.K. services sector contracted 1.0% in Q4 and industrial production suffered its largest fall since 1980. Other data released in the U.K. today saw December retail sales climb 1.6% m/m. Cable offers are cited around the US$ 1.4220 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9470 level and was supported around the ₤0.9335 level.
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