Back on Top: British Pound Surges After 2Q GDP Beats, More Gains Ahead?
INTRADAY PERFORMANCE UPDATE: 09:50 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.03% (+0.59%prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
The US Dollar has seen a bit of a bump the past few days but on Friday, further signs of a growing Europe have the European currencies gunning for top spot. Since late-May, there’s been no shortage of stronger data out of the United Kingdom especially, and today’s latest update showed that the economy grew faster than previously thought in the 2Q’13, at +0.7% y/y versus +0.6 y/y initially reported.
Although the ‘panic’ sentiment regarding emerging markets has dissipated the past two days following the better than expected Chinese manufacturing report, it’s unlikely that the calm remains for long as investors speculate over the Federal Reserve’s decision to taper (or not to) taper QE3 in September.
Given the surge in UK borrowing costs amid the stronger growth data, it’s evident that investors are laughing at the prospect of the Bank of England keeping interest rates low over the next two years. Why? Growth is stronger than expected; inflation remains above the +2.5% threshold; and the Unemployment Rate could hit 7% in the early-1Q’13 if it holds its trajectory.
Considering that the US Dollar has seen a revival this week, the fact that the British Pound is essentially unchanged speaks volumes to the strength of its underlying short-term fundamentals. A look at retail trader sentiment (courtesy of the DailyFX Plus Speculative Sentiment Index (SSI)) shows that positioning remains bearish on GBPUSD; and given the contrarian nature of the index, we should be anticipating further gains ahead.
GBPUSD SSI: May to August 2013
Read more: Global Growth Fears Quelled After Chinese, Euro-Zone PMIs
ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION
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--- Written by Christopher Vecchio, Currency Analyst
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
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