UK GDP figures this morning have shown a significant downwards movement in Sterling in the first half hour since the figures were released. Quarter on quarter GDP for the 4th quarter of 2010 came in at – 0.5 percent with the year on year GDP figure at 1.7 percent much less than forecasts of 2.6 percent. The Pound had already weakened somewhat this morning in the run up to the data release and 9.30am then saw a steep drop in the Pound with the GDP figures confirming to markets that the economy severely slowed in the last quarter of 2010.
Pound Sterling – UK Markets
The Pound has seen a severe drop following the poor fourth quarter GDP figures this morning which have shown reduced growth for the fourth quarter of 2010.
Although many had expected that the GDP figures may come in below target due to severe weather, markets have reacted strongly to this morning data releases with Sterling instantly dropping against other currencies. Other areas such as consumer spending and services have negated the impact of stronger performing areas such as manufacturing.
Sterling was already in a fairly vulnerable position with its sixth straight day of losses against the Euro following a poor day’s performance against the Dollar on Monday with fears about the GDP already setting in.
US Dollar – US Markets
The US Dollar has remained at around a two month low against the Euro but has been making ground on the vulnerable Pound this morning in the run up to the UK GDP figures.
Today sees some interesting data for the US Dollar. Whilst some analysts have been focusing on the expected increase in consumer confidence today that could boost the currency, others have been more wary as today also sees the Case Shiller housing index which is expected to show the largest decline in house prices since December 2009. It certainly could be a mixed day with the State of Union address later also bringing potential for movement in the Dollar depending on the tone.
Euro – European Markets
The Euro has been strengthening as the European Financial Stability Facility prepares to sell its first bonds and confidence in the Euro-zone’s abilities to protect its own sovereign crisis continues to rise.
The EESF will be selling as much as 5 billion Euros of five year notes to help raise funds for bail out packages.
There has also been some continuing hype also over whether there will be an interest rate rise from the Eurozone following Trichet’s comments about inflationary pressures. Although an interest rate rise in the near term is unlikely given the wealth of other problems in Europe, sentiment generally is still supporting the Euro.
Other Currencies – Highlights
The Australian Dollar has fallen after Government figures showed consumer prices rose by 0.4 percent as opposed to a forecast of 0.7 percent in the fourth quarter.
The Australian currency particularly fell against the New Zealand Dollar by 0.4 percent.
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