Market reacts to UK GDP Q3 figure

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Sterling hit a one week high against the Euro and rose versus the US Dollar yesterday, mainly as a result of poor economic data out of the Eurozone. Firstly we had some negative Markit Manufacturing PMI data out of France. The figure came in at 43.5, this was down on the previous month. Secondly we had the same Manufacturing data out of Germany, again this came in weaker than expected. The same data for the whole of the Eurozone also came in weaker than expected.

As manufacturing is such a large part of the Eurozone’s economy all this data combined to ensure the Euro weakened across the board. This Manufacturing data actually saw the Eurozone’s economy contract at its fastest pace in nearly three and half years. As I stated in my Market report on Friday of last week I didn’t expect to see the GBP/ EUR continue to trade in the 1.2200 – 1.2300 100 point range come the middle of this week. At the time of writing we’re currently trading just below GBP/ EUR 1.2400. I hope all Euro sellers took advantage of last week’s Euro gains. We’ve just had the UK GDP Q3 figure out of the UK, it’s come in much better than expected at 1%. Whilst it’s great to see the UK coming out of recession it’s important to remember the definition of a recession is two consecutive quarters of negative growth. In my eyes we must therefore see two consecutive quarters of positive growth to be considered no longer in a recession. Profits from the Olympics were included in that GDP figure, it will be interesting to see if we can sustain growth through Q4.

The Deputy Governor of the Bank of England Paul Tucker will talk later today on behalf the bank. He’s widely anticipated to succeed Sir Mervin King as Governor of the UK’s central bank once Sir Mervin King retires. I hope he does a better job than the last time I watched him speak. Admitting to MP’s that he was aware of certain UK banks rigging the interest rate levels wasn’t his finest hour. Baring in mind the Governor of the Bank of England is expected to drive stability and confidence in the UK’s financial markets I’m not convinced he’s the right man. Although sadly I strongly expect him to be in that role shortly.

Looking ahead at the day’s trading we’ve seen most of the data for today of any significance. If you’re looking to buy USD’s 1.6100 is now achievable and has always been considered a good price in recent times. As for the Euro, Greece have been granted an extension to hit bailout targets. However I still don’t see them staying in the Eurozone long term and as I’ve previously stated the Euro is overvalued at present. If you’re looking to buy Euro’s give me a call and ask me about OCO’s, this trading tool could help you achieve a rate of 1.2400. A good level to achieve given the past five days levels.

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Market reacts to UK GDP Q3 figure

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