The currency blog

Official figures from the Office for National statistics indicated that the UK economy fell more quickly towards the end of last year than initially thought. GDP fell by 0.3% in Q4 last year as opposed to the 0.2% reported. This fall shows a change from the 0.6% in the previous quarter and takes the overall growth figure to 0.7% down from 0.8% estimation. One of the main drivers behind this fall is the 0.7% drop in manufacturing followed by 0.2% construction and services at 0.1%.

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UK Q4 final GDP has come in at -0.3% which is lower than the expected -0.2% and is a disappointing number for the pound which has faded lower this morning against the Euro and the USD.  The number is not a great surprise but more of a disappointment and will heap pressure on the Q1 2012 GDP to come.

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Yesterdays appealing comments by Fed Chairman Bernanke, in addition to better than expected results for German IFO business confidence last month, have boosted risk assets whilst weakening the Greenback against Sterling and the Euro. Markets appear to have shaken off, at least for now, growth worries stemming from weaker manufacturing confidence surveys in China and Europe last week. The S&P 500 climbed 1.4% to 1,416.51, its highest close since May 2008. The Dow Jones rose 1.2%, while the Nasdaq gained 1.8% to close at 3,122.57, its best finish since November 2000.

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The Euro suffered again overnight as reports in various papers talking up the possibility of Greece badly missing their deficit targets. The news has caused another shift out of the Euro as investors have looked for safer places to invest their funds. The articles, if proven true, will add yet more pressure onto the rest of Europe with major doubts already surrounding the success of the latest bailout for Greece worsening.

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Following an indifferent Asia trading session overnight where Japan kept interest rates at 0.1%, the market now awaits key data from the Europe and the US to drive sentiment for the rest of the week.

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Another expectation beating employment report from the US on Friday has the markets in buoyant mood this morning. The headline number was 227K jobs created in February against a forecast of 210K, with strong upward revisions to both December and January numbers. This marks the third straight month of strong jobs growth with gains spread across different sectors of the economy. One negative was that construction jobs showed flat growth for the first time in a couple of months. Interestingly we have again seen the Dollar strengthen on the back of positive US developments, which flies in the face of the risk-on, risk-off paradigm that has dominated FX trading in the US Dollar over the last few years. Commodity currencies initially surged on the news but have cooled off as we start the week.

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