Three major releases in the second half of this forex trading week carry the potential to move the pound sterling dramatically. These three fundamental releases are the minutes of the latest Bank of England rate-setting meeting, the unemployment report, and the first estimate of fourth quarter U.K. gross domestic product.

At the 8 January 2009 Monetary Policy Committee meeting, of course, interest rates were slashed by 50 basis points to an historic low of 1.5%. GBP surged against the Euro and the U.S. dollar, amongst other currencies, on the news, as the forex trading market had fully expected such a move and found it appropriate; however, these gains proved to be short-term and have been lost over subsequent trading days.

An important point regarding the release of the MPC meeting minutes, scheduled for Wednesday, 21 January, is the fact that the press announcement on 8 January made no mention of future rate cuts, leading the market to anticipate at least a short-term stabilisation at the current rate. However, subsequent economic announcements from the U.K. have been unremittingly bleak, providing no support for such a theory, and the forex trading market has begun pricing further cuts into the currency, dragging EUR/GBP above and GBP/USD below established trading ranges.

Should the meeting minutes be neutral in tone, GBP could see another short-term rally, especially as EUR/GBP and GBP/USD daily charts both seem due for some profit-taking on their recent rises. However, should the minutes prove to be particularly dovish, both currency pairs could see further pound depreciation.

The jobless claims report for December 2008, slated for release on the same date, may be another of those unremittingly lousy fundamental announcements although it does not carry quite the same weight as the others. Claims are forecast to have risen by 81K and the unemployment rate to 3.5%. With much poor data already priced into GBP, only a large downside miss is likely to cause a serious pound depreciation, while better-than-expected numbers could lead to another short-term rally. It’s worth noting that the November jobless claims report was in fact just such a large downside miss, with 44K expected and the actual report printing at 75.7K.

The GDP announcement, scheduled for Friday, 23 January, is not expected to break the negative flow of fundamental data. Estimates from economists range from −1.1% to −1.4% q/q, based on dramatic falls in manufacturing output, housing prices, and consumer and business confidence surveys.

Because London remains the center of financial markets, the global downturn is hitting the U.K. harder than some other nations; however, the BoE and the government responded rapidly to the escalating crisis with support for the banking industry and the economy. This is leading some economists to believe the U.K., having taken its medicine early, might therefore recover more rapidly than nations and regions that responded more slowly, with the Eurozone being the most glaring example. In such a scenario, while of course further pound depreciation remains more likely than not, any early symptoms of stabilization later in the year could signal a reverse of this trend, particularly should those symptoms not be duplicated elsewhere.