Market awaits final UK Q4 GDP figures

Tom Tong28/Mar/2012Currency Updates

GBP

Sterling rose to its highest in more than four months versus the Dollar on Tuesday, with the U.S. currency burdened by increasing chances of more U.S. monetary easing and the pound able to shake off the negative effects of a shaky economic outlook in the UK. CBI reported sales figures in the UK beat expectations, providing a boost for the Pound early on yesterday. The outlook was however somewhat negative amid high fuel prices and slow wage growth leading towards an element of unsteady footing ahead of today’s final UK GDP figures for Q4 of 2011. The move in Sterling was largely driven by the Dollar yesterday amid this uncertain outlook for the UK, with many traders quoting another bout of Dollar weakness is needed for Sterling to accelerate beyond $1.60. If these growth numbers show an annualised expansion of over the previous estimate of 0.7%, then Sterling could well hit 1.60 unaided by the Dollar.

USD

The US Dollar was out of favour in the currency markets during yesterday’s session and traded close to a 4 month low on a basket of currencies. The move against the Greenback was triggered by Federal Reserve Chairman Ben Bernanke’s comments from Monday night, which investors have taken as a heavy hint that America’s central bank may commit to a third tranche of Quantitative Easing before the end of the year. Weak US housing sector numbers released later in the afternoon raised further questions about the health of the real economy in the US.

EUR

The Euro traded quite flat yesterday after initially hitting a one-month high against the dollar, helped by a successful Italian debt auction and falling eurozone bond yields, before drifting back amid choppy trading during the late US session. The single currency enjoyed gains of 0.2% against the dollar following the 0.7% rise on Monday, however lost 0.2% against Sterling. The much-vaunted strengthening of the EU’s firewall, designed to protect financial institutions from the contagion emanating from any potential default by a nation state, appears to be a gaining ground, providing further positive news for the single currency.

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Written by Tom Tong

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