UK Gross Domestic Product (GDP) figures were released this morning and the figure of 0.7% growth came out as the market expected. We’ve seen a dip for Sterling against a basket of currencies and many investors are now trying to gauge whether this is just a short-term loss, or something more significant.
The Pound has struggled for the most part this week and it does seem as though its momentum has halted, after weeks of positive moves in the market. I still feel it is likely to find support around the current levels, as we have seen a steady run of economic data emanating from the UK for some time. However, whether we will see it recover all of the recent losses against the USD & in particular the EUR, is difficult to gauge under current conditions.
With the uncertainty surrounding Greece still hanging over the markets, despite the recent debt deal being agreed, we may have to wait to see how the situation develops there before the next major move is made. Any further negative developments are likely to push the Pound’s value back up but personally I feel it will struggle to move back above 1.40 unless there is another breakdown in negotiations.
We also need further confirmation of whether the Bank of England (BoE) will raise interest rates sooner than the markets expect, again news that if confirmed is likely to benefit the Pound.
We’ve seen Cable rates drop below 1.54 this morning and again it does seem as if the USD is winning the battle at present, due to the likelihood that the US FED will raise their interest rate before the BoE does. GBP/USD rates have remained fairly stagnant over the past couple of months and I cannot see a major improvement for Sterling unless the BoE surprise the markets with a rate rise in the last quarter of this year.
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