What we have been saying would happen for the past 2 weeks happened yesterday as GBP/USD broke through the 1.60 level for the first time in 2 months. The low on the day was 1.5922.

This was as a result of worse than expected GDP figures from the UK. While growth has improved from the -0.3% previous reading to -0.2% the market was looking for a shade more. If sterling is going to fight back in 2010 these figures need to start leaping off the page as opposed to not wishing to be seen.

It wasn’t all bad news for the pound yesterday as it managed to keep some semblance of respect against its European cousin. Greece got its hat-trick of ratings downgrades yesterday as Moody’s moved their sovereign debt rating from A1 to A2. This is of course after Fitch and S&P did likewise over the past 2 weeks. Rumour has it all Greek duvets will also receive a ratings downgrade from TOG.

Sterling may rebound today depending on a strong report in the Bank of England minutes. Should there be a couple of dissenters to the holding rates strategy i.e. those looking to raise rates or any talk of definitely cutting QE in Q1 then sterling may be able to get back above the 1.60 mark against the USD and the 1.1250 mark against the euro.

This is the last morning update from us in 2009. May we take this opportunity to wish you all a very merry Christmas and a happy new year. And if anyone is not particularly bothered about getting something under their tree on Friday morning how about asking Santa for GBP/EUR at 1.25?

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