Sterling turned out to be an exciting trade after dismal Q4 GDP data shock market participants. The fourth quarter contraction was influenced by poor weather conditions, but even with these stripped out, the data would have shown flat growth according to the ONS. In the US, markets will await the FOMC policy decision and statement. The announcement comes after weak house price data was offset by stronger than expected consumer confidence figures. In the eurozone, the single currency was helped by a strong demand for EFSF bonds that were issued.
Sterling
Sterling has somehow survived the gut-wrenching experience of preliminary Q4 GDP. The data released was a game-changer and yet sterling’s decline was somewhat contained. GDP came in a full percentage point below expectations and contracted by 0.5 per cent for the quarter. The shocking data was heavily influenced by poor weather conditions, however, the ONS stated that even with weather conditions stripped out, growth would have only come in flat. Markets immediately left long sterling positions but a bottom to sterling’s losses has been seemingly found.
US dollar
The US dollar remains trapped in ranges against most major currencies ahead of the FOMC meeting. The tight range trade comes despite economic data and event risk that could have swayed the dollar.
Euro
The euro maintained higher levels against the US dollar and advanced against sterling. The single currency was supported by strong demand for first sale of EFSF bonds. The €5 billion issue was 9xs oversubscribed. Sentiment was also supported by comments out of Portugal that the country would not tap into the EFSF.
Japanese yen
The Japanese yen has seen a relatively quiet overnight session with little to no economic data to inspire trade. Rather, the yen has made small gains in front of the FOMC meeting in the US. The yen’s gains could be a sign that global sentiment is shifting as most equity markets close lower.
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