The UK is back in the limelight and the UK GDP figure released this morning showed the UK grew at its fastest rate since 2007. The pound still has a lot of support and this reading has encouraged greater demand for sterling driving both the GBP/USD and GBP/EUR rates higher. A busy US calendar may limit sterling losses, but the euro remains vulnerable for yet another session. GBP/EUR: Sterling powers on •Reasons behind a strong pound seem to be coming in full flow, and the strong UK GDP reading adds to the list of positive UK data supporting the pound. The strength of sterling has come under scrutiny recently by the BoE, and it may not be long before the central bank’s message is received and the pound gives up some of its recent gains. •Given the momentum behind the pound, it is unlikely the single currency will be able to do curb losses and so the only way is up for GBP/EUR today. GBP/USD: The dollar struggles against a robust pound •The Federal Reserve will meet tomorrow and is expected to reduce stimulus further by another $10bn. This is yet to be reflected in the rate and focus is firmly on UK growth. Solid US figures are needed to help curb losses, after yesterdays below expected new home sales data did nothing for the greenback. •Levels remain elevated, however, we expect the dollar to limit sterling gains ahead of the Fed announcement tomorrow. EUR/USD: Some more trading at 1.36 •The euro managed to temporarily breach 1.37 after German Ifo figures, but has since been at the mercy of a firmer dollar. The market still does not feel comfortable with a stronger euro and provided US data delivers we could see further downside in this rate. •The rate has declined this morning but still remains above 1.3650. We expect the rate will decline further but the euro will have enough support to remain above 1.36 GBP/CAD: Sterling remains in control •It seems like another day of vulnerability for the loonie as sterling rebounds on the back of UK data and directs the rate towards 1.85. With sterling well supported, it is unlikely that the loonie can do much to limit sterling gains. •We expect the pound will be able to trade above 1.85 in todays session.
Posted on: Tue, 28 Jan 2014 11:17:49 +0000
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