I wrote a piece on the prospects of GBPEUR yesterday which can be found here.

It has already started to decline; we are still at reasonable levels but we do anticipate further drops.

French and German GDP contributed to a unexpected jump in European GDP yesterday with the euro making gains against the USD, JPY and GBP during the trading session.

Both grew by 0.3% in Q2, a surprise given the previous reading for Germany was -3.5% and France -1.3%. With the US also being able to show off a positive GDP figure it is only the UK who hasn’t been able to get out of the rut yet. This falls in line with Mervyn King’s assertions of a ‘slow and protracted’ recovery and against what Chancellor Alistair Darling announced in The Budget.

With the increase in global sentiment, equity markets were higher yesterday with the FTSE at levels not seen since the beginning of October 2008 and subsequently the dollar was on the back foot. GBPUSD managed to break back into the 1.66s while EURUSD closed in on the 1.43 level. It now looks like GBPUSD has hammered out a range between 1.63 and 1.67; should it hit the highs again I would expect it to be taken lower fairly quickly and should support at 1.63 give way a move back into the 1.5s is definitely on the cards.

AUD continues to be the darling of the currency would with traders queuing up to place bets on whether their central bank, the RBA, will decide to hike interest rates soon. All this speculation is driving AUD higher; if it finishes above 0.8355 it will be its 4th consecutive week of gains against the USD.

Can the Eurozone continue this run of good data? Euro CPI is due at 10.00 with a -0.6% figure expected. US CPI is also out at 13.30 with the market expecting 0.0% while Michigan Consumer Confidence is expected at 70.00 when released at 15.00.

Have a good weekend.

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