GDP show recovery has stalled

The latest GDP data for the three months to June actually showed that the pace of the recovery has stalled and investors are shunning the Dollar in favour of other high-yielding currencies. The Euro rose to a high of $1.3262 yesterday, as reports in the U.S showed that consumer spending and personal incomes unexpectedly stagnated in June, emphasising the lack of jobs to prop up the economy.

while the UK currency has reached its highest level against the U.S Dollar in six months, peaking just under the pivotal resistance level at $1.5970 – As we highlighted on Monday this level will represent a strong area of resistance and a break above would indicate a further move higher towards $1.7044, the beginning of the decline in August 2009 to a low of $1.4335 in May 2010.

The Pound rallied against the struggling U.S Dollar for the ninth day in a row, the longest stretch of gains in more than 18-years, amid further confidence that the UK economic recovery is gathering momentum. The government-owned lender Northern Rock Asset Management Plc announced yesterday that it turned its first profit since its nationalisation in September 2007, boosting confidence in the recovery.

The Pound rallied against the majority of the 16-most actively traded currencies, as former Bank of England Deputy Governor John Gieve said that policy makers shouldn’t loosen monetary policy or extend quantitative easing measures, given that the economy is showing signs of strengthening. Gieve said at an event in London; “I don’t think they should be considering quantitative easing right now because growth figures are encouraging. They would need negative growth in a quarter to get back to thinking about that.”

Robson added that “trend followers will look at these moving averages and say that sterling is a buy. In thin markets, momentum trades have more power, because the computers that trade using these techniques never go on holiday.”

The Pound has remained largely unchanged at 1.2044 against the Euro, losing modestly on the day, after a report showed that UK construction growth slipped in July. The data follows a report earlier in the week, which showed that manufacturing output recorded the slowest pace in five months in July, leading to some skepticism that the UK economy may have peaked in the second quarter.

The Dollar remains subdued against almost all of the 16 most actively traded currencies, including the Euro, as the U.S currency is being undermined on more than one front. Firstly, the U.S economic outlook has deteriorated significantly over the past quarter, with persistent concerns over housing and unemployment.

Tags:  dollor, foreign exchange, gdp, High Yielding Currencies