The week is drawing to a poor close for the Pound, which having weakened earlier in the week due to rising oil prices, has taken another hit with poor GDP figures for the last three months of 2010 coming out this morning. The revised GDP figures came out even worse than the original reading for the last quarter of 2010 showing a drop by 0.6 percent. Although many believe that the GDP reading can be explained by the impact of severe snow and ice in the winter, the figure will serve to help counteract the reasons for an interest rate rise in the UK and has weighed down on the Pound this morning.
Pound Sterling – UK Markets
Sterling has now tumbled to the lowest levels in a week against the Euro with this morning’s revised GDP figures for the fourth quarter of 2010 inciting yet another drop as they indicate the economy may be too fragile for an interest rate rise.
Some had predicted that the original GDP reading which had suggested a shock negative slide by 0.5 percent would be revised upwards to indicate growth. In the event however, the figure came out even worse at a rate of – 0.6 percent. Although the poor figure can be largely attributed to the effects of winter weather, the hope that the figure would be revised upwards is what was believed may push more members of the Bank of England to vote sooner for an interest rate rise. The GDP figure will therefore continue to weigh on Sterling.
Policy members remain split on interest rates with Andrew Sentance still being the most vocal to support a rate hike, saying in a speech last night that it is time for rates to start rising from their record low gradually.
The GDP data has overshadowed positive news on consumer confidence which edged higher from a twenty two month low due to a slight recovery in shopper’s personal finance.
US Dollar – US Markets
The US Dollar has dropped further against the resurgent Euro but gained on the fragile Pound. News about oil prices has continued to have an impact with funds flowing out of the Dollar and into the Euro.
The currency continues to fall against its safe-haven rival, the Swiss Franc, also in response to worsening violence in the Middle East. GDP figures are also due from the US this afternoon.
Euro – European Markets
Ongoing focus on interest rate rises with growing expectations that Central Bank officials will suggest a rise is on its way in Europe caused the currency to strengthen again. It also strengthened in response to higher oil prices.
It also expected today that German consumer confidence prices will rise the most in two years and the consumer price index inflation from Germany is also expected to rise.
Other Currencies – Highlights
The New Zealand Dollar gained back some ground as Standard and Poor’s rating agency reiterated that the earthquake would have no immediate effect on the nation’s credit rating.
The currency lifted a little in response to the news but still remains fragile following the worst earthquake in eighty years.