News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.



Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
More View more
Real Time News
  • Despite the IMF's update to 2021 growth forecasts and strong earnings after hours, risk trends are pacing like markets are worried. Traders are likely awaiting the Fed, and that has me look at $EURUSD and $USDCAD
  • Wall Street Futures Update: Dow Jones (-0.08%) S&P 500 (-0.01%) Nasdaq 100 (-0.06%) [delayed] -BBG
  • Greed is a natural human emotion that affects individuals to varying degrees. Unfortunately, when viewed in the context of trading, greed has proven to be a hindrance more often than it has assisted traders. Learn how to control greed in trading here:
  • The British Pound could remain vulnerable against the US Dollar while perhaps looking to push higher against the Australian Dollar, Canadian Dollar and New Zealand Dollar.Get your market update from @ddubrovskyFX here:
  • Commodities Update: As of 02:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 0.43% Gold: 0.23% Silver: 0.04% View the performance of all markets via
  • Forex Update: As of 02:00, these are your best and worst performers based on the London trading schedule: 🇨🇦CAD: 0.12% 🇪🇺EUR: 0.03% 🇬🇧GBP: 0.01% 🇳🇿NZD: -0.02% 🇨🇭CHF: -0.03% 🇦🇺AUD: -0.03% View the performance of all markets via
  • RT @FxWestwater: Australian Dollar Outlook: $AUDUSD Snubs Hot Q2 CPI as Sydney Lockdown Extends Link:…
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 94.10%, while traders in Wall Street are at opposite extremes with 75.33%. See the summary chart below and full details and charts on DailyFX:
  • $AUDUSD little changed on an overall mixed Q2 Australian CPI report Headline rates were slightly better-than-expected - 3.8% y/y vs 0.8% seen - 0.8% q/q vs 0.7% seen But, the RBA preferred trimmed mean gauges were as expected - 1.6% y/y - 0.5% q/q Eyes on #Fed next!
British Pound Humbled as UK Slides into Double-Dip Recession

British Pound Humbled as UK Slides into Double-Dip Recession

Christopher Vecchio, CFA, Senior Strategist

The British Pound has had a very interesting past twelve months. On April 28, 2011, the GBPUSD traded to its yearly high at 1.6745, but within six months, the pair had sunk to a new yearly low at 1.5270 on October 6. While the GBPUSD traded back towards 1.6000 in the fall, the start of 2012 was rocky for the Sterling, which saw the cable sink to a two year low of 1.5234 on January 13, 2012.

Recently, on the back of better than expected economic data, Bank of England policymakers began to shift away from their aggregate neutral if not dovish stance. Adam Posen, one of the two remaining doves calling for more quantitative easing on the Monetary Policy Committee, dropped his bid for looser policy. Traders have taken this shift in the MPC as a sign that rates will soon rise, and accordingly, have bid up the British Pound. The GBPUSD rose to a fresh yearly higher at 1.6170 earlier today in hopes that the first quarter growth reading for the United Kingdom would confirm the BoE’s outlook; instead, it now appears the British economy has dipped back into a recession, muddling the British Pound’s recent bullish momentum.

British_Pound_Humbled_as_UK_Slides_into_Double-Dip_Recession_body_Picture_1.png, British Pound Humbled as UK Slides into Double-Dip Recession

While there have been some improvements in the British economy over the past few months, the first quarter preliminary growth reading did not show it. On a quarterly basis, growth contracted by 0.2 percent after contracting by 0.3 percent in the fourth quarter of 2011; on a yearly basis, growth remained unchanged in the first quarter after growing by 0.5 percent in the fourth quarter of 2011. Of course, it is important to make note of the consensus forecasts, because those are the readings that helped propel the British Pound to fresh yearly highs against the US Dollar: quarterly growth was expected at 0.1 percent; yearly growth was expected at 0.3 percent. When considering the United Kingdom’s growth relative to that of the United States the past few quarters – 3.0 percent annualized in the fourth quarter of 2011 – the British growth picture looks even more dismal.

Thus, not only did the economy contract, growth was much worse than what was expected. While the British Pound fell across the board on the data release, the big question now is whether or not the BoE will reassess their outlook, and whether or not there will now be another liquidity injection in the coming months. Recent inflation data and other gauges of economic output suggest that more easing is possible.

British_Pound_Humbled_as_UK_Slides_into_Double-Dip_Recession_body_Picture_4.png, British Pound Humbled as UK Slides into Double-Dip Recession

Overall growth aside, inflation has been the biggest issue for BoE policymakers. Certainly the government’s fiscal austerity measures have helped ease price pressures, but beyond what has been already implemented, it appears that inflation won’t come off any further given the measures in place. In fact, after year-over-year price pressures peaked at 5.2 percent in September, they fell to their lowest level in February since November 2010. But inflation has already started to tick back up: the same gauge rose to 3.5 percent in March. A higher inflation outlook is one of the only impediments the BoE will have to implement more easing.

Beyond recent inflation data, trade data suggests that the renewed appeal of the Sterling over the first few months of 2012 has impeded economic growth prospects. Although only data from January and February is available, we do note that in both January and February import growth outpaced export growth. In fact, as exports dropped by 2.0 percent in February, imports rose by 0.2 percent. Similarly, while exports fell by 0.6 percent in January, imports expanded by 1.4 percent. Considering the Sterling’s performance against the United Kingdom’s largest trading partners in January and February, the recent trade data is surprising: the Sterling fell by 0.39 against the Euro in January and February; it lost 1.28 percent to the Swiss Franc; though it appreciated 2.35 by against the US Dollar.

A weaker Sterling is exactly what the British economy needs, however, especially against the Euro and the US Dollar. By further boosting exports, further investment could enter the country in order to help manufacturers meet foreign demand for British goods. Case and point: industrial and manufacturing production contracted by 2.3 percent and 1.4 percent, respectively, in February.

With growth slowing to the point where the economy teeters on the edge of a double-dip recession, it remains to be seen whether or not the BoE sticks to its recent hawkish rhetoric.Yesterday, MPC member David Miles said that his vote for more quantitative easing “looks vindicated” in light of recent data and the first quarter growth reading suggests this may be true. Accordingly, it is likely that the BoE backpedals away from their recent hawkish commentary. Just last week, it looked like the Sterling was set to be one of the best performing major currencies through the first half of the year; now, the Sterling is a bit more humbled, and so too are the BoE’s hawks.

Forecast: GBPUSD to 1.5600 by the end of June

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, send an e-mail with subject line "Distribution List" to

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.