The Pound Gains Against the US Dollar In Spite Of Negative UK GDP Growth Data

Modified: Monday, 27 February 2012 08:56 BST - Written by John Cameron

STORY LINK The Pound Gains Against the US Dollar In Spite Of Negative UK GDP Growth Data

The Pound to US Dollar exchange rate is 1.5859.

Friday’s session in the currency markets was marked by a renewed weakening of the US Dollar, as global appetite for risk increased.

The uptick in investor sentiment was due to a number of factors - market whispers suggesting that China was set to further ease its domestic monetary policy helped calm market participants’ nerves – action is generally preferred to inaction, especially in tricky trading conditions, so the whispers were considered to be a positive development for the global economy. Friday afternoon’s release of a stronger than anticipated Michigan Confidence survey caused risk aversion to further dissipate, heaping more pressure on the Greenback before the market close. This took the GBP USD exchange rate to 1.5899, its highest level since 8th February, as institutional investors liquidated their positions of safety and got involved in higher risk investments.

Elsewhere, initial UK GDP data for Q4 of 2011, released on Friday morning, pointed to a contraction of 0.2% in British economic activity in the three months to the end of last December. The release proved to be Sterling-neutral, as analysts had been expecting such a result. If Q1 2012 figures show another dip in UK growth, then Britain will officially have re-entered recession.

Today’s session sees a relatively light schedule of data releases. The key release for the week comes on Wednesday afternoon, with UD GDP data for Q4 2011. Investors holding Dollar-denominated assets will be hoping that the quarter-on-quarter figure at least matches the 1.1% anticipated.

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