Forex snapshot

The pound has given up any gains it made after a good GDP figure, while disappointing German IFO numbers weigh on the euro. 

Pound coin and dollar note
Source: Bloomberg

Pound drops despite good GDP figures

The pound initially jumped versus the US dollar after the UK revealed growth figures that were in line with expectations, but the gains were short-lived.

The pound is trading at £1.6968, down 0.1% on the day as it turns out that restoring growth to the pre-crisis level is not good enough for traders.  In the second quarter of this year, the British economy grew at a rate of 0.8%, meeting analyst’s estimates; since the announcement, sterling made a move towards $1.7 but quickly reversed.

The pound has been under pressure versus the US dollar for the past 24 hours. Yesterday sterling slid despite soft manufacturing and housing numbers from the US, but the pound is at a one-month low and this could provide a buying opportunity.

The US will release durable goods figures at 1.30pm (London time). A disappointing report could help the pound. Sterling is receiving support at $1.6894, with a short-term target of $1.7080.

German IFO hits euro

A weak German IFO business climate figure has forced the euro lower versus the US dollar, but volatility remains low.

The euro is trading at $1.3449, 0.1% lower on the day. Softer-than-estimated figures from Germany highlight that weakness in southern Europe is dragging on the strongest economy in the eurozone. The decline of the euro will be a long drawn out process, however, not the short sharp collapse witnessed during the debt crisis. As Alastair McCaig stated yesterday, a close above $1.35 could lead to a change in trend, but for now the sights are on $1.34.

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