The Pound has recovered exceedingly well from yesterday’s damagingly weak Q1 GDP figures and has even reached a fresh 7-month high of 1.6206 against the US Dollar. It appears that investors are either distrustful towards the suspiciously low estimate from the Office for National Statistics, or feel that the current economic climate in the UK is far superior to that of the beginning of 2012.
The Pound to Euro exchange rate at midday on the 26th April 2012 is 1.2233
The Pound to US Dollar exchange rate at midday on the 26th April 2012 is 1.6173
The Pound to Australian Dollar exchange rate at midday on the 26th April 2012 is 1.5595
The UK economy contracted by -0.2% in the first 3 months of 2012, which initially sent Sterling spiralling downwards as markets reacted to the shock announcement. However, the CBI quarterly measure of business confidence defied the GDP results and showed an improvement from -25 in January to +22 in April, and the Nationwide consumer confidence survey also detailed an improvement, rising from 44 to 53 through March.
The Pound has been performing exceptionally well against the Euro lately and it seems that – despite the initial reflex to sell – investors are choosing to ‘stand by their man’ so to speak. And why wouldn’t they? The Eurozone is suffering from a rash of peripheral anaemic economies, a virus of self-defeating austerity, and a chronic case of uncompetitiveness throughout its constituent parts. Whereas Sterling has seen its economic ailments remedied in recent times by potent PMI figures, an unexpected Trade Balance growth spurt, and a therapeutic fall in Unemployment.
The US Dollar failed to benefit from the lacklustre UK GDP report as they suffered a minor setback of their own. US Durable Goods Orders fell -4.2% compared to an expected rise of 1.9%, but the Buck was not overly affected until Federal Reserve Bank Chairman Ben Bernanke gave his interest rate decision press conference. Bernanke failed to rule out further increments to the Fed’s quantitative easing programme, and warned of the continuing threat of economic downturn in Europe having an adverse effect on US growth efforts. He acknowledged that the US economy is recovering, but recognised that a weak housing market and high unemployment levels are jeopardising the recuperation. Investors were looking for more assurances, and the US Dollar slumped following the speech which allowed the Pound to US Dollar exchange rate reach its 7-month high of 1.6206.
A lovers tiff, involving poor Gross Domestic Product, between Sterling and investors seems to have passed with relative ease. It will now be interesting to see whether the 1st Quarter affair has any significant repercussions for the Pound, and the relationship it shares with its –thus far – loyal investors.