The GDP figure for the UK has come out sharply lower than expected (-0.4% vs. an expectation of a 0.2% rise). This has lead to a sell off in the pound with GBP/EUR back below the 1.10 level and GBP/USD also falling over 1% in the space of 2 minutes.

This dramatically increases the chances that we will see an expansion of the Bank’s Quantitative Easing program following the inflation report in November. This would extend the pressure on sterling with falls to 1.06 against the euro and 1.60 against the USD likely and the possibility of parity against the European single currency once again as we move into the Christmas period. This will not be a slow slide but instead could turn into an avalanche of sterling negativity.

This move has put GBP through recent technical levels that will act as a hindrance to any sterling strength in the near future.

If you wish to trade or talk with one of our hedging consultants call the corporate desk on 020 7801 9050

Jeremy Cook, Chief Economist
Direct Line: 020 7801 3023
Address: Regent House, 16-18 Lombard Road, London SW11 3RB, UK
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The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.