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Sterling Plummeted This Morning

25/01/2011

By Nick Ryder - Smart Currency Exchange

Sterling plummeted this morning – dropping by 1.3% against the US dollar and 1.1% against the euro – as 4th Quarter GDP showed that the economy contracted by 0.5% in the last 3 months of 2010.

Markets were expecting poor weather to have an impact with analysts expecting a 0.5% gain, but the figure came as a great shock as there no longer seems to be any justification for last week’s talk of higher interest rates before the summer.

Sterling is likely to maintain subdued now for the coming months until the fundamental data catches up with inflation – any talk about further economic stimulus in tomorrow’s Bank of England’s minutes are likely to be the final nail in the coffin for sterling’s recent rally.

On the plus side, we have seen a lot of clients moving sums back into sterling taking advantage of sterling’s demise.

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