GBP up versus EUR and USD
Friday’s release of US GDP for the first three months of this year provided substantial evidence that the momentum in the economy has slowed since the beginning of the year. Markets had been expecting growth at 2.5%, however, the release was disappointing at 2.2% quarter-on-quarter annualised. As a result GBP/USD pushed past 1.6300 before falling back a fraction.
The Eurozone is never very far away from the spotlight but this time attention is firmly on Spain. After Friday’s widely expected S&P downgrade, the Spanish Economy minister reported that slower economic growth and higher unemployment will be a factor until 2014. This will clearly impact upon the nation’s ability to raise funds in the bond market. GBP has seemingly forgotten it’s own GDP issues earlier last week and has pushed past 1.2300 versus EUR.
Elsewhere – Asian stock markets seemed to track softer Chinese data and reflect fears that the Chinese economy could be due a harder landing than anticipated. While officials have signalled that the renminbi’s trading band could be widened, we suspect that China is experiencing an internal revaluation, with higher wages reducing competitiveness, rather than the need for exchange rate appreciation.
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