The British pound depreciated sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6060 level and was capped around the $1.6120 level. Many data were released overnight. First, the December RICS house price balance declined to +30 from +35 in November, the first decline since February. Second, BRC December retail sales surged to a five-month high. Third, RICS reported house prices moderated last month. BCC noted the U.K. economy is improving but is struggling to enter a recovery phase. Former Bank of England Monetary Policy Committee member Buiter yesterday reported the central bank may start to raise interest rates by the middle of the year, possibly taking the Bank Rate to 0.75% to 1.00%. Buiter suggested the BoE's rate hike could come before the European Central Bank contemplates one. The big news in the U.K. remains the general election that is scheduled to be called before June. Prime Minister Brown is attempting to rally the Labour Party following widespread discontent from within his own ranks. Tory opposition leader Cameron is pledging earlier and deeper deficit reductions. Cable bids are cited around the US$ 1.5730 level. The euro gained ground vis-à-vis the British pound as the single currency tested offers around the ?0.9010 level and was supported around the ?0.8995 level.
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