Forget Black Wednesday, This Is Funereal Friday

Well, where do you start on a day like today? Have we ever seen anything like this? I'm not sure we have. The pound down 20 cents in a week. Chicago up and down like a brides nightie. The stock market through the floor. It's very difficult to look through all the cr@p to see the big picture today. I really don't know what to post.

News that the U.K. economy contracted more than forecast in the third quarter, showing that the economy slipped into a recession for the first time since 1991, sent the pound tumbling below $1.53 in its biggest one-day drop in at least 37 years.

The decline surpassed that of Black Wednesday in September 1992, when the U.K. was driven out of Europe's Exchange Rate Mechanism.

"This is once-in-a-lifetime stuff, we're all sat under our desks with tin hats on," said one analyst quoted on Bloomberg. I know what he means.

The news has left the BoE in a complex situation as inflation remains well above the bank’s limit of 3%. The downturn in the economy has certainly fueled expectations for the MPC to ease policy further as fears of a global recession intensifies, which would only fuel bearish sentiment for the pound.

Credit Suisse overnight index swaps are now showing that investors expect the Bank of England to cut at least 175bp over the next 12 months.

The pound fell to $1.5272, its lowest level since August 2002. Against the euro, the pound weakened to a record 81.96 pence, dropping for a fifth day, from 79.69 pence.

Today's decline brought this week's drop versus the dollar to 11.5 percent. The currency lost 9.8 percent in the week when billionaire investor George Soros and other speculators drove it out of the Exchange Rate Mechanism.