Currency Update

Risk appetite has returned to the market today as the latest GDP figures from the US suggest that the US is out of recession. The US GDP figures released earlier today beat market expectations with an annualised rate of 3.5% vs 3.2% expected. Whilst these figures are positive it remains to be seen how sustainable these levels of growth are, especially after the massive government stimulus has finished working itself through the economy.

The following improvement in confidence has led to safe haven currencies such as the USD and JPY coming under downward pressure.

Sterling has advanced through Interbank GBPUSD 1.65 and through Interbank GBPEUR 1.1100.

Expect plenty of volatility as we enter November as sentiment remains fickle. Both the Bank of England and the European Central Bank meet on November 5th. Analysts will be especially keen to see if the Bank of England extends its Quantitative Easing program and if so by how much. Some economists suggest that we could see an extension by as much as £50B but the consensus seems to suggest an extension of £25B is the most likely outcome.

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