GBP/USD Loses Support As British Riots Widen

Pound/dollar has fallen from high support and is trading at the lowest level in three weeks. There are quite a few reasons for the drop. The mayhem on the streets causes not only injuries and damage to property, but also took the first life.

The riots in England have spread from London’s Tottenham neighborhood to many cities, including Liverpool and Birmingham. The British Prime Minister David Cameron cut short his Italian vacation and has ordered the deployment of 16,000 policemen.

In addition, British manufacturing production and trade balance disappointed earlier in the day, falling short of expectations. Up to now, the British pound managed to weather the storm in the markets quite well: Britain’s conservative government vowed to cut debt and distanced itself from the debt hit US and euro-zone.

But the austerity measures taken by the government took their toll on the economy, and are now felt on the streets. The criminal activity of disgruntled Brits seems to be worse than the violence seen in Greece, and definitely worse than the 15-M movement in Spain.

GBP/USD is now holding on to support at 1.62, after falling sharply off the 1.6280 to 1.63 region, which is now resistance. Further support is at 1.6110 and 1.60.

For more on the pound, see the British pound forecast.

Update: GBP/USD lost support and is now at 1.6180. This break still needs to be confirmed.

Markets are awaiting Ben Bernanke and possible hints of QE3 in the US. See the FOMC for all the details.