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Sterling jumps after GDP report
Sterling received a shot in the arm on the back of the GDP report which came in a 0.7% on a quarterly basis, in line with estimates. It is worth noting that the rate of growth is declining; the UK economy increased by 0.9% between the first and second quarter. Even though the figure meets expectations, I doubt it will change monetary policy in the UK, which will prevent extended gains by the pound.
As I stated yesterday, the Bank of England have suggested twice in the past seven days that interest rates will remain unchanged until the middle of 2015. Sterling has been in a downward trend since July and the remarks from the UK central bank will reinforce the pattern.
Now that we have taken out $1.6060, the next target is the pre-BoE minutes level of $1.6120. The next level up is circa $1.6180 which was the recent high but it may be out of reach today.
Should the pound’s burst on the back of the GDP report run out of steam, $1.60 is the one to watch. The pound has found support around the $1.5952-$1.5957 area twice in the past three weeks so that is the next level watch on the downside.