GBP GDP figures this morning came out as expected with a positive gain of 0.8%, this created some further sterling strength as rates once more attached the allusive 1.20 barrier. It was GBPAUD and GBPUSD rates however that saw the biggest gains as Sterling became a buy for many as a safe haven against risk globally. I personally think it is very unlikely that we will see rates climb much further from this current high and think we will see rates drop once more within the next few days. There seems to be no real data on the horizon to push levels over 1.20 and beyond.
Some will argue that the European Central Bank could cut their interest rates next week. I personally think this is unlikely as they only cut them a few weeks ago, its simply too soon for them to conclude a further drop is needed. Interest rate change between the UK and Europe will however probably be the driving factor for and significant changes in the GBPEUR ratio but I think this is year away. It is not like we can see the ECB drop rates to below negative……
This time of the month with little data due markets are traditionally driven by risk and this current drive up towards a 10 month high is probably just that. Before Christmas I think it is going to finish lower than where we are now.
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