Sterling plummets on back of poor GDP figures

Published: 25 January, 2011

The rate of sterling plummeted earlier today, dropping by 1.3% against the US dollar and 1.1% against the euro, as the market reacted to worse than expected GDP figures, writes Nick Ryder of Smart Currency Exchange.

Fourth Quarter GDP figures showed that the economy contracted by 0.5% in the last three months of 2010.

Markets were expecting poor weather to have an impact with analysts expecting a 0.5% gain, but the figure came as a great shock as there no longer seems to be any justification for last week's talk of higher interest rates before the summer, added Ryder.

Sterling is likely to maintain subdued now for the coming months until the fundamental data catches up with inflation - any talk about further economic stimulus in tomorrow's Bank of England minutes are likely to be the final nail in the coffin for sterling's recent rally.

On the plus side, we have seen a lot of clients moving sums back into sterling taking advantage of sterling's demise. If you are being paid in a currency other than sterling, now is a good time to look at exchanging or putting a strategy in place, said Ryder.

* Go to www.SmartWineSpirits.com for a live quote from Harpers Wine & Spirit's currency partner.

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