The Gross Domestic Product of United Kingdom is expected to have contracted in the last quarter and as a result, the major currency of United Kingdom, Pound, also known as Sterling has gone down to its weakest level against Euro in the last 11 months. Not only against Euro, but it has gone down against most of its major peers as well. For instance, Pound is currently at its lowest value against USD in the last 5 months. Citigroup Inc. has already asked the investors to sell Pound because of the poor economic fundamentals. Reversing an earlier advance, the British gilts also experienced a fall on today.
The Senior Currency Strategist of Royal Bank of Scotland, Paul Robson stated that investors are expecting a poor out turn of the Gross Domestic Product. Apart from this, the retail sales growth in January has also declined. Many investors feel that the country is still struggling to recover from the financial problems, as commented by Robson.
Today, Sterling retreated against Euro by 0.8% and currently is at 84.76 pence per Euro. It also declined by 0.4% against Euro and is currently priced at $1.5780. The currency at one time, declined to $1.5757, marking its lowest value since 28th August. In the 3rd quarter of last year, the GDP of UK experienced an increase of 0.9%. However, a group of analysts has already predicted it to contract by 0.1% in the 4th quarter. On the other hand, the gauge which measures the annual retail sales growth experienced a slide to 17 in January, 2 down from 19 of December. The statistics was released by the Confederation of British Industry. Some analysts are predicting that it will go down further in February, to 13.
Among the 10 developed market currencies, Pound is already the second worst performer, just behind Yen. Sterling has declined by 2.8% in 2013, whereas, Euro and USD, gained 2% and 0.4% respectively.
The 10-year British gilts have experienced an increase of 2 basis points and are at 2.01% currently. On the other hand, the 1.75 percent bond scheduled to mature in September, 2022 experienced a fall of 0.17 and is now at 97.94.
As stated by the renowned Citigroup strategist, Valentin Marinov, the safe haven bid for Sterling is gone and the markets are more likely to sell Sterling.