British Prelim GDP, came out worse than expected, yet the Pound is recovering and reaching last week’s levels. Here’s a roundup of the latest events in the critical week for the Pound.
The critical week for the Pound came to an end with the Prelim GDP – the main gauge of economic activity. British GDP fell by 1.9% in the first quarter of 2009 – worse than early expectations of 1.5%, and worse than 1.6% in the last quarter of 2008. Recession in Britain is deep. There’s a good reason to pound the Pound!
At the same time, another important indicator, Retail Sales, was released in Britain, and it was surprising – it rose by 0.3% instead of an estimated fall of 0.3%.
Naturally, GDP is more important, and the Pound fell immediately after the release. In a very shaky trade, it fell in the hours after the release, dipping to 1.4577 during the day.Â
But this didn’t hold. At 12:#0 GMT, American Durable Goods Orders and Core Core Durable Goods Orders were published. Both figures were positive – Durable Goods Orders fell by only by 0.8%, better than the expected fall of 1.4%. Core Durable Goods Orders, the more important figure, fell by 0.6%, half of early expectations at 1.2%.
These two good American figures increased risk appetite. Traders felt relaxed on good American data, and flocked away from the dollar. GBP/USD made a big U-turn upwards almost 200 pips!
Currently, GBP/USD trades at 1.4714, very close to last week’s close at 1.4795. There are still a few hours till the end of forex trading, and there still could be a move sparked by Geithner’s speech at the end of the G7 meetings, but trading will be thin, and I can start concluding the critical week for the Pound:
- Bad start – The Pound fell on Monday, at the start of forex trading, without any reason.
- Small Recovery – On Tuesday, CPI is ok and the Pound slightly recovers.
- Darling Slashes the Pound – The Annual Budget Release is gloomy – the Pound falls on Wednesday, a big day of economic indicators in Britain.
- Recovery on Thursday – Dollar weakness lifts the Pound despite disappointing CBI Industrial Order Expectations.
- Closure on Friday – Bad GDP hurts the Pound, but good American data ignites risk appetite and sends the Pound up.
All in all, it’s been an exciting week for traders of the cable. The trend was more bearish than bullish, but there isn’t a clear new direction. The Comeback of the Pound won’t continue so fast
Also the Euro had interesting week. I’ll cover it later…
