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It was the big one that the market had been waiting for- UK GDP. This was touted to show that the UK economy had exited the recession but it was woefully disappointing. UK Q-3 GDP has come in demonstrably weaker than expected, -0.4% quarter on quarter, -5.2% year on year compared to median forecasts of +0.2%, -4.6% y/y.  Following on from yesterdays weaker retail sales data the pound has once again fallen of a cliff this morning- so far we have lost over 1.5% against the USD and the EUR. Unfortunately the good cheer surrounding sterling earlier in the week following a less dovish stance from the Bank of England has now been smashed and talk of parity against the euro is likely to be the market chatter once again.

Over to the Eurozone and we have seen some decent data in the form of PMI (Purchasing Manager Index) for services and manufacturing. The data came in better than expected and is an important indicator of business conditions in the Eurozone. Meanwhile the German IFO came in pretty much as expected.

Looking at the currencies this morning we can see that EUR/USD is still holding firm above 1.50 following the positive economic data. Sterling is the big loser as you would expect and is still falling against the major currencies- it has breached 1.10 against the euro and is testing 1.64 against the USD; the next support is 1.6340.

Discuss on this on the Currency Exchange Forum