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The British pound (GBP has squeezed higher following comments earlier this week by Bank of England (BoE) Deputy Governor for Monetary Policy Charlie Bean to the effect that quantitative easing (QE) would eventually have to be removed gradually to avoid inflationary pressures and it appeared that the UK economy was “troughing.” Following the previous barrage of anti-GBP comments by BoE officials and the expansion of QE, speculators had built up an IMM short cable position. This was in anticipation that QE would be maintained for the foreseeable future or even expanded further in November. The Bean comments have put the latter in doubt, causing the market to cover some of these short positions. Given the size of the short position, we would not be surprised to see cable break the 1.65 level and EUR-GBP break 0.90 over the next few days.

There are no major UK economic releases today. Next week, we get the October Rightmove house price data on Monday, followed by the September public finance report and September M4 data on Tuesday. On Wednesday, markets will pour over the minutes of the last BoE policy meeting, together with the results of the UK CBI quarterly industrial trends survey. Finally, on Thursday, we get September retail sales, along with the advance estimate of Q3 GDP. The market consensus for this last is 0.2% q/q and -4.6% y/y vs. -0.6% q/q and -5.5% y/y, which would mean that the UK economy was technically out of recession – though it clearly does not feel like that.