With British traders back at their desks after the extended holiday weekend, the market immediately picked back up on yesterday’s GBP/USD spike below 1.85. Without Monday’s swing low below this pivotal level, today’s fundamentals may not have generated enough momentum to push the pair to fresh 13-month lows.

However, with the psychological barrier having already lost its luster, event-risk traders were more than ready to put the pound through the ringer again. Adding a fundamental driver to the move this time around, the BBA disappointed MPC members and sterling bulls alike by printing a July loans report that held near its lowest level in a decade. Mortgage approvals for home purchases rose to a 22,448 pace last month, which was better than the revision to the previous month’s reading. However, with loans falling 65 percent year over year and the overall value of the lending dropping to 3.2 billion pounds (the lowest level since 1998) there are no delusions that this is the worst depression in the housing market since the economy’s last recession. However, with all this taken into account, it is arguable that the UK data wasn’t the initial trigger for the GBP/USD’s drop this morning. Indeed, the decline began a full half hour before the housing data crossed the wires. It isn’t a coincident that the pound’s sharp drop against the US dollar began at the same time as the EUR/USD’s plunge this morning. This suggests that the fading growth numbers for German (and more generally the Euro Zone) will exacerbate the slump in the UK as the outlook for exports worsens and lays bare the problems in consumer spending, the housing sector and the financial sector.