Disappointing US GDP Data Sends GBP USD Rate Higher, Outlook For GBP EUR Positive

Published: Friday, 26 April 2013 14:00 BST - Written by Toni Johnson

STORY LINK Disappointing US GDP Data Sends GBP USD Rate Higher, Outlook For GBP EUR Positive

The major data release today came in the form of this afternoon’s US GDP data, which revealed that the world’s largest economy is expanding at a considerably slower level than analysts had been anticipating. The vast American economy grew by an annualised 2.5% during the first quarter of 2013 – economists had been anticipating a year-on-year increase of a far healthier 3.0%. Expressed as a quarterly figure, this represented growth of 1.2% during the three months to the end of March – again below the 1.3% expansion expected.

The market’s instant reaction to the release was to move against the US Dollar, sending the Pound to US Dollar exchange rate (currency : GBP USD) up through the 1.5500 level. The direction of price action following the publication suggests that investors are still viewing US data releases through the prism of the Federal reserve’s ongoing Quantitative Easing programme – any sign that economic conditions in the States are softening makes it more likely that QE is here to stay in America, for the time-being at least. The continued over-supply of Dollars that this would trigger would in turn lead to a weakening of the relative value of the Greenback.

Elsewhere, there was more negative news for the euro this morning, when the latest French unemployment data revealed that joblessness in the Gallic state reached a record level last month. There are now over 3.2m French people out of work and looking for a job. The data follows hot on the heels of figures published earlier in the week which showed that Spanish unemployment has reached a record level of 27.2%. The evidence is mounting that the austerity measures which the eurozone’s leaders have enforced during recent years are beginning to weigh heavily on economic activity in the region as a whole. This sentiment has caused the single currency to give up ground on the day, sending the Pound to euro exchange rate (currency : GBP EUR) briefly back above the 1.1900 level earlier.

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TAGS: American Dollar Forecasts Currency Predictions Dollar Poun Forecasts