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Weekly Analysis

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The British Pound edges upwards as the GDP figures come out slightly better than

Fri, Aug 28 2009, 14:25 GMT
by Benny Menashe

Finotec Group Inc.

Sterling gained on Friday after figures showed the UK economy contracted at a slightly slower rate in the second quarter than initial estimates.
Data on Friday showed that Britain's economy shrank by a quarterly rate of 0.7 percent in the second quarter. This was slightly better than an initial print of -0.8 percent, but it took the annual drop up to 5.5 percent, still the sharpest fall since records began in 1955. "The data was slightly stronger than expected and had a slight effect on sterling," said Paul Robinson, sterling strategist at Barclays Capital in London. But he added: "While -0.7 percent is better than -0.8 percent, it's not much better, so it's not having a huge impact on sterling." The GBP/USD is currently trading at $1.6360 as of 2:35pm, London Time.

The euro will extend this month’s gains against the pound as a “bullish reversal” shows the currency’s decline since December may be over, BNP Paribas SA said, citing trading patterns. The 16-nation currency has risen for eight days versus the pound, its longest run of gains since the December slide began, and has closed above so-called resistance at 87.85 pence, a sign it will make further gains, according to a team of analysts led by Hans-Guenter Redeker, head of currency strategy at BNP Paribas in London. “Weekly momentum is not overbought but accelerating and rising at the briskest pace since the February to March advance,” the analysts wrote in a note to clients yesterday. “All these bullish factors suggest the March decline is complete, and maybe the entire December decline.” The EUR/GBP is currently trading at 0.8790 as of 2:40pm, London Time.

Oil rose to around $73 a barrel on Friday, lifted by slightly better GDP and jobs data out of the United States, although still range-bound over the week. Some analysts said stronger economic data in the short-term could not overcome a gloomier long-term outlook. "Despite our confidence in the recovery process over the next six months, there is precious little indication from the energy side that industrial activity in the U.S. is recovering," analysts at J.P. Morgan wrote in their Oil Markets Weekly note. Crude Oil is currently trading at $73.20 as of 2:46pm, London Time.

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Published on  Fri, Aug 28 2009, 14:28 GMT