Sterling jumps after positive GDP data

Published: 27 October, 2010

Sterling jumped against the euro and US dollar yesterday after surprisingly positive UK GDP data for the third quarter.

Sterling jumped against the euro and US dollar yesterday after surprisingly positive UK GDP data for the third quarter and a welcome vote of confidence for the UK from credit rating agency S&P.

Currency Rates
EURO/GBP - 1.146
US$/GBP - 1.581
CHF/GBP - 1.562
CAN$/GBP - 1.625
AUS$/GBP - 1.627
ZAR/GBP - 11.092
JPY/GBP - 129.39
HKD/GBP - 12.273
NZD/GBP - 2.121
SEK/GBP - 10.731
US$/EURO - 1.379
HUF/GBP - 309.29

GDP growth came in at 0.8% for the third quarter against an expectation of 0.4%, boosted by construction activity that was stronger than expected. Sterling hit a high of €1.1453/£1 - a huge movement against Monday's low of €1.1184/£1 - after the positive data cooled speculation over further Quantitative Easing in the UK. Against US dollar, sterling hit $1.5894/£1. Sentiment towards the UK also received a boost, as the credit rating agency S&P upgraded the outlook for the UK's 'AAA' credit rating from 'negative' to 'stable' after citing the government's spending review as evidence of the level of commitment to cutting the deficit.

In the Euro zone, the euro gave back recent gains with the biggest one day fall against sterling since June and a poor performance against the US dollar after US consumer confidence data came in better than expected. The euro has struggled against the US dollar in the last week as investors wait to see the full extent of the widely expected Quantitative Easing by the Federal Reserve in the USA. Closing below $1.40/€1 has not helped the euro either, as this is a key psychological level that will not be broken until investors know more about what is happening in the USA.

In the USA, the US dollar had a relatively strong day against most currencies aside from sterling, as investors await next week's Federal Reserve meeting in which the Fed is expected to announce additional Quantitative Easing measures to help stimulate the US economy. The dollar also strengthened against the Japanese yen, coming off the 15 year lows as the Japanese government announced that they would "act decisively" in the currency markets if needed despite the apparent "ceasefire" announced in the "currency wars" over the weekend at the G20 summit in South Korea.

Elsewhere, the Swedish crown fell by 1% against the US dollar and 2.8% against sterling as (despite a hike in interest rates) it was announced that the next rate hike would not be for some time.

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