Daily currency report

The pound rose against the euro and the dollar after the release of better than expected UK economic growth numbers. The rise in the second quarter gross domestic product represented the strongest growth in four years and blew market forecasts out of the water. The EU stress bank tests results were released, with only seven out of the 91 banks tested failed. Although markets had questioned the test’s stringency, the reaction to the result was positive overall, boosting the single currency. As a result of the positive data this side of the pond, the dollar remained on the back foot.

Sterling

The pound looked set to start the second half of the year with a renewed sense of optimism after stronger than expected UK economic growth numbers. Sterling surged against both the dollar and the euro as data revealed gross domestic product jumped 1.1 per cent on the quarter. This represented the strongest growth in four years and was almost twice as fast as the market forecast of a 0.6 per cent.

US dollar

The dollar was kept on the back foot after taking direction from strong data released in both the UK and the eurozone. The dollar remained close to three- month lows against the pound and a two-month low against the euro. With an absence of any US data, the dollar suffered after the release of better than expected GDP data from the UK and additionally markets initially responded to the EU stress bank tests in a positive manner.

Euro

European Union policymakers and regulators voiced their relief at the bank stress test results and the conclusion drawn that the banks would only need a total of €3.5 billion of extra capital. Market expectations had ranged from a figure between €30-100 billion to support the banks. As a result the euro was able to claw back some of the losses suffered earlier against the pound and the dollar.

Japanese yen

The Japanese yen fell to a seven-week low against the euro after Europe’s stress tests boosted share prices.