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Back on Top: British Pound Surges After 2Q GDP Beats, More Gains Ahead?

Back on Top: British Pound Surges After 2Q GDP Beats, More Gains Ahead?

Christopher Vecchio, CFA, Senior Strategist

INTRADAY PERFORMANCE UPDATE: 09:50 GMT

MAJORS

AUD

CAD

CHF

EUR

GBP

JPY

NZD

(vs USD)

-0.14%

-0.44%

-0.09%

+0.08%

+0.19%

-0.24%

-0.41%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.03% (+0.59%prior 5-days)

ASIA/EUROPE FOREX NEWS WRAP

The US Dollar has seen a bit of a bump the past few days but on Friday, further signs of a growing Europe have the European currencies gunning for top spot. Since late-May, there’s been no shortage of stronger data out of the United Kingdom especially, and today’s latest update showed that the economy grew faster than previously thought in the 2Q’13, at +0.7% y/y versus +0.6 y/y initially reported.

Although the ‘panic’ sentiment regarding emerging markets has dissipated the past two days following the better than expected Chinese manufacturing report, it’s unlikely that the calm remains for long as investors speculate over the Federal Reserve’s decision to taper (or not to) taper QE3 in September.

Given the surge in UK borrowing costs amid the stronger growth data, it’s evident that investors are laughing at the prospect of the Bank of England keeping interest rates low over the next two years. Why? Growth is stronger than expected; inflation remains above the +2.5% threshold; and the Unemployment Rate could hit 7% in the early-1Q’13 if it holds its trajectory.

Considering that the US Dollar has seen a revival this week, the fact that the British Pound is essentially unchanged speaks volumes to the strength of its underlying short-term fundamentals. A look at retail trader sentiment (courtesy of the DailyFX Plus Speculative Sentiment Index (SSI)) shows that positioning remains bearish on GBPUSD; and given the contrarian nature of the index, we should be anticipating further gains ahead.

GBPUSD SSI: May to August 2013

Back_on_Top_British_Pound_Surges_After_2Q_GDP_Beats_More_Gains_Ahead_body_GBPUSDsssi.jpg, Back on Top: British Pound Surges After 2Q GDP Beats, More Gains Ahead?

Read more: Global Growth Fears Quelled After Chinese, Euro-Zone PMIs

ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION

Back_on_Top_British_Pound_Surges_After_2Q_GDP_Beats_More_Gains_Ahead_body_x0000_i1028.png, Back on Top: British Pound Surges After 2Q GDP Beats, More Gains Ahead?

See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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

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