GDP Holds Steady

It has been announced this morning that UK Gross Domestic Product (GDP) figures have held steady at 0.8% as expected, at the time of writing Sterling is holding steady against most the major currencies. The fact that the UK economy has been confirmed as still growing is a positive as recession now seems like a distant memory however to see Sterling appreciate we would need to see GDP continue to rise. Personally I believe we will see UK GDP increase over the course of 2014 as the economy continutes to strengthen and as a result there is the outside chance that towards the end of 2014 we could see an interest rate rise and therefore see Sterling exchange rates push up even higher. However, in the meantime it does seem like Sterling has found its trading parameters, especially against the Euro meaning it has remained reasonably steady of late, however comments yesterday from ECB member Christian Noyer has led to some concerns over another European Central Bank (ECB) interest rate cut. I would be surprised to see interest rates cut again next week at the next ECB meeting but the comments have raised the possibility that there is still room for an interest rate cut, that would mean Europe would have zero or very close to zero exchange rates, similar to Japan. This just goes to highlight the issues faced by Europe at the moment. While theoretically this should mean we could see Sterling gain against the Euro, the fact that Europe is our largest trading partner could mean we are negatively effected by any European weakness and so bad news in Europe does not necessarily mean Sterling will benefit making the outlook for the currency pair unclear.

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