Sterling jitters as UK growth shrinks

Yesterday was an important day in the markets as we saw UK GDP released ahead of the FOMC interest rate setting meeting last night.

The pound started off the day on the slide against the euro as German Gfk consumer confidence survey came out early doors better than expected, followed a couple of hours later by UK GDP, which although slightly better than analysts forecast, was down on the last quarter by 0.2 percent. The pound lost half a cent against the single currency, but with polls on the referendum showing a swing towards a Stay vote, seemingly boosted by Barack Obamas speeches over the weekend the pound bounced back and tested key resistance levels again.

As the US markets opened ahead of the Fed rate decision we had the release of new home sales figures which came in convincingly are the forecast by nearly a 1 percent margin which moved sentiment towards the dollar. The pound lost a cent against the euro and half a cent against the greenback over the rest of European trade. Elsewhere the Loonie continued to chip away at the pound gaining another cent following on from its gains yesterday put down to better oil prices.

With the Fed leaving rates unchanged, which was expected, the dollars gains were halted. Markets were not expecting much from this meeting though and look towards June when the next press conference will be held as per last month. There is some expectations that we could see a rate rise again in June but rumours will be flowing off the back of data and Fed comments in the meantime so if you have a dollar trade coming up, stay in touch with the team for valuable guidance.

Finally, the surprise loser this week has been the Aussie dollar, which has lost 8 cents against sterling over the past week as inflationary woes lead to speculation of an interest rate cut when the RBA meet on the 5th May. There is some thoughts that we will have a 25 basis point cut then and another similar cut in August. But with government elections coming up in the meantime we could see some volatile times for the Aussie going forward, so bear this in mind if you are looking to transfer down under anytime soon. In addition to this the Kiwi has fared poorly also, losing 6 cents against the pound. The RBNZ meets last night saw interest rates held meeting expectations so little additional downside movement was seen at the time.

So onto today and we kick off with German unemployment figures just before 9am followed by EU business climate, consumer confidence and economic sentiment indicators. German inflation comes out at lunchtime closely followed by US GDP and jobs figures.

So with a lack of anything British, will the pound struggle to keep afloat? If you have a transfer coming up, make sure to give us a call to discuss your options and get updates during what will be a busy trading day no doubt.