The British Government have recently announced a widely expected bailout plan of mortgage lender Bradford and Bingley. Bradford and Bingley’s branch network and deposit business will be sold to Spain’s Banco Santander and the remainder of the group will be nationalised.

This has prompted sharp selling of the pound earlier in the global session as it further highlights the demise of the housing market. The leading indicator for the growth of the Eurozone’s largest economy, the German IFO index, fell to its lowest level since May 2005.

Also we have seen ECB officials this week showing concern over the outlook of the Eurozone growth, although they have maintained a tough stance on inflation which means interest rates will remain on hold for the time being. On Friday, this was further confirmed when one ECB official did state that there may be a rate cut in March, or possibly before, given the current economic and financial situation.

Key releases from the U.K. will be the announcement on Tuesday of second quarter GDP, which is expected to be 0%. However if the U.K. economy shows any negative growth then we will be another step closer to a nationwide recession. Also out on Thursday we have the release of Nationwide’s house prices for the last 12 months. Last month showed a year on year fall of house prices at -10.5%, this month it is expected to increase to -12.6% indicating further lack of growth in the housing market.

GBPEUR cross is expected to be at the mid to low 1.20’s due to the poor figures this week.