(RTTNews) - Monday, the British pound showed weakness against its major counterparts after a report showed that U.K. economy contracted by the most in nearly 30 years during the fourth quarter. The pound thus declined to a 1-week low against the Japanese yen and a 5-day low versus the US dollar.
The UK economy contracted 1.5% in the last three months of 2008, which was the fastest pace of decline since 1980, reports said citing the National Institute for Economic and Social Research or NIESR. Gross domestic product declined 0.6% in the prior quarter.
Since 1955, when quarterly figures were first produced, there have been only five quarters in which output has fallen more, the think tank said.
Against the US dollar, the British pound edged down during early deals on Monday. At 3:30 am ET, the pound-dollar pair declined to a 5-day low of 1.4929, compared to 1.5179 hit late New York Friday. If the pair drops further, 1.438 is seen as the next target level.
The British pound lost ground after hitting a high of 0.8865 against the European currency during early Asian deals on Monday. The pound that closed Friday's North American session at 0.8861 against the euro, slipped to 0.8949 at 3:55 am ET. On the downside, 0.96 is seen as the next target level for the British currency.
The euro declined earlier on speculation that the European Central Bank will lower interest rates this week. The ECB meets to discuss rates on January 15. Markets have largely priced in a 50 basis point cut, with some investors betting on a 75 basis point move after the last such reduction in December. The ECB has cut rates by 175 basis points to 2.5 percent since October as inflation decelerated rapidly from a July peak of 4.0 percent along with a sharply slowing economy and falling oil prices.
Euro area annual inflation slowed more than expected to 1.6% in December, a flash estimate from the Eurostat showed today. In November, the rate was 2.1%. Economists had expected the inflation rate to ease to 1.8%.
Policy makers are cutting borrowing costs to spur spending after a seizure in global credit markets helped trigger the euro region's first recession in 15 years.
Against the Swiss franc, the British currency showed weakness during Monday's early deals. At 3:55 am ET, the pound-franc pair declined to 1.6738, compared to Friday's closing value of 1.6907. The pair is currently trading at 1.6776 with 1.784 seen as the next target level.
The pound that closed Friday's New York deals at 137.07 against the Japanese yen dropped to a 1-week low of 134.43 at 4:05 am ET Monday. On the downside, the pair may likely find support near the 130 level.
There are no significant economic reports scheduled to be released from US today.
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