The dollar was little changed against the euro on Friday but about 2% lower for the week as today's US economic data showed the US economy is deteriorating and the Federal Reserve is in recession fighting mode, while European economic numbers were better than expected and the European Central Bank is in inflation fighting mode. Sterling declined versus most key currencies and fell to an all-time low against the euro as weak UK economic data increased the probability of further Bank of England interest-rate cuts. The Australian and Canadian dollars and Swiss franc were little changed while the yen rose against most major currencies on increased risk aversion as US stocks traded lower.
The GBP/USD dropped as UK consumer confidence fell to the lowest level in 15 years and UK house-price rise slowed to the lowest rate in 12 years. The risk of a UK recession is also increasing and the banking system is under stress. The chart shows a large head-and-shoulder formation, with long-term bearish GBP/USD implications. There are long-term support levels at the 1.97 and 1.93 areas, but the pair is likely to fall below that, possibly to 1.80-1.85.