Euro Market Update 7 July 2009
Last week's price action represents a setback in sterling's recent recovery. However, despite the renewed "doom and gloom" reporting in the media following last week's worse than expected GDP figures, the technical outlook suggests that the uptrend may not be over quite yet.
The first estimate of first quarter GDP was - 1.9%. Last week's revision put that figure at an even worse than expected - 2.4%, sending the pound justifiably lower. It hasn't developed into the kind of sell off we were seeing last year though, and since the big figure emerged we've drifted back towards an old familiar level, 1.1575 (February's high). The market is now looking towards this week's Bank of England meeting with some trepidation, with expectations that the previously announced quantitative easing measures will be expanded from £150bn to £175bn, while interest rates are widely expected to remain on hold at 0.5%. The increase in QE is perceived as a short term negative for the pound.
This setback is not good news, and there could be more downside in the short term, but in the longer term the uptrend is still intact, and it would take a break below 1.1280 (the June low) to really call the recovery into question. Clients with Euro requirements should strongly consider covering at least half now, while we are still trading close to the recent highs.
The first estimate of first quarter GDP was - 1.9%. Last week's revision put that figure at an even worse than expected - 2.4%, sending the pound justifiably lower. It hasn't developed into the kind of sell off we were seeing last year though, and since the big figure emerged we've drifted back towards an old familiar level, 1.1575 (February's high). The market is now looking towards this week's Bank of England meeting with some trepidation, with expectations that the previously announced quantitative easing measures will be expanded from £150bn to £175bn, while interest rates are widely expected to remain on hold at 0.5%. The increase in QE is perceived as a short term negative for the pound.
This setback is not good news, and there could be more downside in the short term, but in the longer term the uptrend is still intact, and it would take a break below 1.1280 (the June low) to really call the recovery into question. Clients with Euro requirements should strongly consider covering at least half now, while we are still trading close to the recent highs.