The Pound snapped two days of gains against the Euro yesterday while also plunging to a near three week versus the Dollar after a measure of UK consumer confidence slumped to the lowest level on record.

The Gfk index fell to a reading of minus 39 last month, below the level reached on the eve of the last recession in 1990.

Elsewhere, the Pound also succumbed to reports that house prices declined 1.7% in July as the Nationwide house price index recorded the ninth consecutive drop in home values.

Yet another barrage of weakening economic reports has curtailed Sterling sentiment and fuelled speculation that the UK will slip into a recession.

The recent economic developments led to comments from BoE policy maker, David Blanchflower, who said that the MPC will need to reconsider it's stance on interest rates in next week's meeting.

The Pound may continue to decline against the Dollar today as a report from the Chartered Institute of Purchasing & Supply is expected to confirm that UK manufacturing slipped further into negative territory last month.

The Dollar consolidated just under the month-long high versus the Euro last night while the U.S currency also bounced back against the Pound after a strong intraday slide following report that second quarter GDP grew less than forecasts.

The report from the Commerce Department showed that economic growth increased at an annual rate of 1.9% the three months to June, which fell short of expectations and fuelled speculation that a recession may have already begun in the final months of 2007.

Elsewhere, a separate report showed that U.S labour market conditions are deteriorating as claims for jobless benefits rose to 448,000 last week as the total number of initial filings was the highest since April 2003.

The focus today will fall on the monthly U.S job report and the Dollar may come under some pressure as the economy is expected to have lost 73,000 jobs last month while the unemployment rate increased to 5.6%.

Nevertheless, the Dollar will again be susceptible to commodity price gains as crude oil prices dropped yesterday amid reports that U.S fuel demand weaken further and the Dollar may make further gains if prices fall below $120 a barrel in New York.

Data Released 1st August

U.K 09:30 CIPS Manufacturing PMI (July)

EU 09:00 Manufacturing PMI (July)

U.S 13:30 Non-Farm Payrolls (July)

- Unemployment Rate
- Average Earnings

U.S 15:00 Construction Spending (June)

U.S 15:00 Manufacturing ISM (July)

written Adam Solomon