GBP EUR Exchange Rate Slumps To 13-Month Low Following Weak Q4 UK GDP Data

Modified: Friday, 25 January 2013 10:05 BST - Written by John Cameron

STORY LINK GBP EUR Exchange Rate Slumps To 13-Month Low Following Weak Q4 UK GDP Data

The news just keeps getting worse and worse for investors holding the Pound Sterling; this morning’s initial estimate by the UK’s Office of National Statistics suggests that Britain’s lacklustre economy shrank by 0.3% in the final three months of 2012. The data came as a severe disappointment, as analysts had been anticipating a showing of -0.1% - as with all global economic releases, it’s all relative.

The UK growth data for Q4 suggests that Q3’s relatively healthy quarterly print of 0.9%, suggesting that this was simply a flash in the pan and attributable to one-off events including the Queen’s Diamond Jubilee and the London Olympic Games. Today’s figure looks like a resumption of ‘normal service’ for the British economy.

The market’s initial response to the publication was predictably Sterling-negative, sending the Pound to its lowest level against the euro since 12th December, 2011 at 1.1725. The Pound Euro exchange rate (currency : GBP EUR) crashed down through the previous level of support at 1.1756 without thinking twice, suggesting that market sentiment is now strongly anti-Sterling. The mood of investors towards the Pound may disimprove further if the world’s three leading credit ratings agencies use the release as additional evidence that the UK is struggling to pay down its £1tn + national debt.

However, GBP EUR’s move down to 1.1725 didn’t last too long – within 30 mins of the release, Sterling had recovered to trade in the 1.1740s once more. However, consecutive closes below the previous interim floor of 1.1756 would send out a strong negative signal for the pair moving forward.

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TAGS: Daily Currency Updates Euro Forecasts Euro Pound Forecasts Pound Eu Forecasts