Sterling has bounced back against all of its major counterparts posting daily highs of $1.5894 and €1.1421 against the US dollar and euro respectively.
A better than expected reading of 0.8% growth for the UK economy in Q3 was due to come in at only 0.4%. This helped to dampen speculation the Bank of England may soon implement more quantitative easing. The positive Q3 data came after a stellar Q2 reading of 1.2%, suggesting that the UK economy is more robust than previously thought as the government prepares to implement austerity measures across the board, which were outlined last week.
The pound’s rally gained further momentum as the ratings agency S&P revised its outlook on the UK economy to ‘stable’ from ‘negative.’ This helped to give further assurance over the strength of the UK’s economy.
However, sterling’s mini-recovery could be short lived as notorious dove/doomsday prophet/MPC member Adam Posen is due to give a speech in Belfast at 5pm. If he decides that another rant outlining that monetary easing is the only thing to save the UK economy, we could see GBP sold-off late in the New York session.
In other news, Paul the psychic octopus has died aged two and a half. Paul’s uncanny knack for correct predictions would be very helpful on the rollercoaster that is the global currency market at the moment. R.I.P to the greatest analyst of all time!
Tom Hampton
Analyst – Caxton FX
