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Sterling falls, ahead of GDP figures

Published:  27 April, 2011

Sterling fell against the euro yesterday, hit by broad euro strength and investor concern ahead of today's GDP figures.

Sterling fell against the euro yesterday, hit by broad euro strength and investor concern ahead of today's GDP figures.

Currency rates - April 27

EURO/GBP - 1.1210
- 1.6448
- 1.4385
- 1.5658
- 1.5212
- 10.948
- 134.47
- 12.781
- 2.0394
- 10.001
- 1.4671

Last quarter's GDP was a disappointment, and many analysts are not expecting GDP for the first quarter of 2011 to beat expectations. A weaker than expected growth figure would also see sterling's strength against the US dollar crumble after enjoying the highest levels against the currency since December 2009 in the last week. On the other hand, a better than expected number will see expectations of an interest rate hike surge.


In the euro zone, the euro strengthened following a strong Spanish bond auction. The euro had suffered earlier in the day after comments from European Central Bank President Jean-Claude Trichet saw investors cut euro holdings in favour of the US dollar. The President stated that there was a need for a strong US dollar, but the euro soon gained back ground. It is a quiet day for data today in the euro zone, but given the magnitude of US and UK data, there is likely to be significant movement.


In the USA, the U.S. dollar eased against the euro as investors bet the U.S. Federal Reserve will keep its loose monetary policy in place today's meeting later this evening. Many investors feel that the US dollar will remain under pressure as the Federal Reserve is far more reluctant to tighten its policy any time soon - contrast this to the ECB that has already begun to raise interest rates, and is expected to raise rates twice more before the end of the year. Fed Chairman Ben Bernanke also speaks at the first ever post-rate decision press conference, so his comments will be closely watched for any deviation from the official statement.


Elsewhere, investors piled into currencies including the New Zealand dollar as the world's major central banks pushed down the yen. New Zealand's consumer price inflation accelerated to 4.5 percent in the first quarter of this year and the Australian dollar was up 0.3 percent against the US dollar, close to the 29-year high it hit on Monday. It had earlier fallen as commodities edged lower.


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