Pound Increases against Euro on Speculation of Positive Economic Data

The Pound, the major currency of UK rose against Euro on today, following the losses of last 3 weeks. A Government report is scheduled to come out on this week and economists predict that the same will show that UK has been successful to avoid the triple dip recession on last quarter. Pound, also known as Sterling, increased not only against Euro, but most of its major counterparts as well. According to a person familiar to the plan, Chancellor of the Exchequer George Osborne will be unveiling the 2nd phase of a strategy for boosting the loans for not only small companies, but regular consumers as well. The UK gilts gained as well, despite the decision of Fitch Rating to cut credit rating of UK. On this Friday, the Office for National Statistics will be releasing its report on the Gross Domestic Product of the country.

According to the Foreign Exchange Strategist of Bank of Tokyo-Mitsubishi UFJ Ltd., Lee Hardman, on last week, Sterling sold off as many bad news had priced in. However, at this point of time, it seems to be sort of stabilizing into the Gross Domestic Product data. Hardman added that the market consensus is for a flat growth and not a triple dip recession. However, on long term basis, the weakness of Pound is expected to continue.

On today, Sterling increased by 0.2% against Euro and it is currently priced at 85.49 Pence per Euro. In the last 3 weeks, Sterling declined by 1.5% against Euro. On the other hand, despite falling to $1.5204, marking the weakest level since 5th April, at a later time, Sterling increased by 0.2% and is currently priced at $1.5263.

In the 1st quarter of current year, the GDP of UK expanded by 0.1%. Incidentally, in the last quarter, the GDP shrank by 0.3%. Pound is the 2nd worst performer among the major currencies in 2013 and only Yen has performed worse. Among other major currencies, USD increased by 3.2%, whereas, Euro went ahead by 1.9%.

The 10-year UK gilt yield declined by 1 basis point and is currently at 1.65%. At one point of time, it went to 1.64%, which is the lowest level since 8th April. On the other hand, the 1.75% bond which is due in September, 2022 increased by 0.11 and is currently at 100.87.

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