Currency markets await UK GDP data

26th October 2010
Good morning. The pound hit it's lowest in 7 months against the Euro yesterday on QE fears and today's GDP figures. This morning Sterling has recovered slightly though, and rates as at 08:30am are as follows:


Pound weak against Euro and US Dollar

Sterling started the week badly falling against most currencies, and a 7 month low against the Euro. The reason why is fears the Bank of England may pump more money into the economy through Quantitative Easing.

Today however the Euro has also weakened helping rates recover back to €1.1300. Many analysts are being very bearish on the pound, with some forecasts now suggesting GBP/EUR may fall to €1.08 and GBP/USD may fall to $1.40 by June next year.

GDP Figures

Much will rest on today's GDP figures. Investors were concerned weak UK third quarter gross domestic product data on Tuesday could increase the chances of more QE in the UK. Economists expect Britain's economy grew just 0.4 percent between July and September, a third of the 1.2 percent recorded the previous quarter.

Paul Mackel, currency strategist at HSBC said "The GDP data is the main focus for sterling this week and if it disappoints the market will factor in a higher probability of more QE".

Sterling has underperformed most currencies other than the dollar since BoE minutes last week showed one policymaker, Adam Posen, voted for an extension of quantitative easing.

Market participants were also wary that harsh public spending cuts announced by the UK finance minister last week may further hamper an already fragile economic recovery, further increasing the chances of the BoE opting for more QE.

If the GDP figures come in at or below expectations, expect further pressure on Sterling. The figures are released at 09:30am. Keep track of developments on our Twitter feed.

If you are looking for the best exchange rates, click the link below to send us an enquiry, and have a free consultation on what's happening in the currency markets.

Labels: ,