Sterling rallies on UK GDP figures but recession worries remain

Tom Tong27/Jul/2011Currency Updates

GBP

With GDP posting figures in line with expectations yesterday, sterling saw a brief rally, yet more pressure was put upon chancellor George Osborne as figures failed to satisfy market expectations. With meshed growth outlined at 0.2 % for Q2, questions are being asked as to whether the output for Great Britain can sustain the austerity measures imposed by the chancellor’s deficit reduction plan. With such factors included in the play down by the office of national statistics as the royal wedding, Olympics, sunshine and tsunami, markets are becoming ever more cautious to back sterling, despite Mr Osborne stating that Britain was a safe haven among the storm. Questions are now being asked as to whether the UK economy faces mild stagnation and the possibility of a double dip rescission.

EUR

With the market now seemingly committed to the short-term solvency of the peripheral debt crisis, the euro was well bid in yesterday’s trade. Technical factors now seem to be taking the forefront amongst short term movement of the euro. With the general expectation of when said crisis comes to a head, the market seems fit to follow suit and back what seems to be an ever-stronger single currency. With Christian Noyer stating that the ECB is still in a state of ‘strong vigilance’, the market is again expecting another rate hike in next month’s meeting.

USD

With the ever-prolonged debt crisis still waning on market sentiment, the US electorate and congress seems unwilling to find common ground in this continued spat of impasse. Washington’s lack of progress sent the dollar broadly lower against a basket of currencies. The pressure against the Dollar intensified, with the US currency breaking a record low against the Swiss franc as investors and market traders seek the save haven currency of choice in the current market climate.

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Written by Tom Tong

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