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UK Quarter 4 GDP for 2009 came in + 0.1 %, below the forecast of + 0.4 % but signals that the UK has finally emerged from the recession- for now. The UK economy contracted 4.8 % in 2009 the biggest fall on record so a year to forget for the UK economy and the pound. The data was much weaker than expected and the pound fell from a high of 1.6268 against the USD down to 1.61 following the data. A spokesman for the Prime Minister affirmed that we are right to be confident but cautious about the economy- I would say more cautious than confident. The concern now is that the UK could slip into a double dip recession if the tepid growth experienced cools as we move through 2010.

Also this morning we have had released the German Ifo business climate index which came in better than expected at 95.8 against the forecasted 95.10- this has helped to keep the euro supported in the markets particularly against the USD.

Crazy markets this morning, aside from the economic data there is lots of other factors in the mix…the S&P has revised their outlook for Japan to negative from stable; China has taken further steps to tighten its monetary conditions through the increase in reserve requirements for several banks as they move to achieve sustainable growth; In addition the market is awaiting further corporate earnings today and US consumer confidence. As a whole risk is off the table as European stocks are down, oil and gold is lower.

The main gainers so far in the currency markets have been the safe havens such as the USD and JPY but the shear choppiness in the markets suggests that there is a lot of headless chicken trading today..

Discuss on this on the Currency Exchange Forum