The British pound depreciated vis-à-vis the U.S. dollar last week as cable tested bids around the US$ 2.0220 level and was capped around the $2.0680 level. The pair lost about 245 pips last week. BoE took the repo rate lower by 25bps to 5.50%, citing weakening demand, a slowing economy, and deteriorating market conditions. The government may nationalize Northern Rock if a suitable buyer is not found.

Data released in the U.K. last week saw November manufacturing PMI improve to 54.4 from 52.8; the volume of market loans in the banking system fell from ₤640 billion in August to ₤249 billion at the end of September; BRC November high street sales were up 1.2% m/m, up from 1.0% in October; November PMI construction was off to 54.3; the November CIPS PMI services index worsened to 51.9; Halifax November house price inflation fell to a 20-year low; BRC November annual shop price inflation remained at 1.1%; October manufacturing output was up 0.3% m/m and 0.3% y/y; and Q3 construction output was up 3.0% y/y.