British Pound The Bank of England?s decision to leave interest rates unchanged triggered a major sell-off in the British pound against the US dollar, Euro and Japanese Yen. The most interesting aspect of today?s move is the fact that trader positioning was so misaligned with analyst expectations. Given the narrow vote that supported the last rate hike, there was little chance for a follow-up move today. However the sharp divergence between UK and Eurozone monetary policy has earned EUR/GBP the status as the day?s most market moving currency pair on a percentage basis. The sell-off in the GBP/USD was exacerbated by a report from the Wall Street Journal that UK based HSBC was forced to set aside 20 percent more capital (most likely in US dollars) to cover the delinquencies in the US sub prime mortgage market. The fear that HSBC will struggle to recover from this has sent the company?s shares down to an 8 month low. However the blowup in the sub prime market has even greater significance. We are sure that HSBC, who is the world?s third largest bank, is not the only ones to suffer from the growing delinquencies in the US sub-prime lending market. If this problem exacerbates, it may be the first sign that the US economy is in trouble. The UK trade balance is due for release tomorrow and the strong level of the pound could push the deficit higher.