May 26, 2010
Ranging, ranging, ranging! The GBPUSD has been stuck in a range the past two weeks now, bouncing between 1.4250 and 1.4500. Will this be the recurring theme this week?
The pound dropped throughout the day, as risk aversion continues to dominate traders mindsets. Some have suggested that the tension between North and South Korea has caused traders to become jittery. Now, I’m not too sure if this was the actual cause, but it’ll be interesting to see how this develops down the road. With traders jumping all over any bad news, if this situation continues to worsen, we could see more traders move their assets away from higher yielding currencies like the pound.
And now, on to some economic data and news…
GDP figures released yesterday came in line with expectations, as first quarter growth was revised up slightly to 0.3%. While this was somewhat good news, you have to remember that the previous quarter, the UK economy grew by 0.4%. In addition, government spending rose by another 0.5%, which put spending up 3.1% from a year ago. This indicates that the growth of the economy has been fueled by government spending.
Hmmm, isn’t newly elected Prime Minister David Cameron vowing to cut budget spending? The economy is already showing anemic growth and if the government has to cut its spending (and it does!), now what? Another round of contraction later this year perhaps?
No major data coming out today, so may see more range bound motion on pound pairs. Just be careful out there and stay on top of the news – as I always say, risk sentiment can change on a dime so watch out and keep those risk management rules in check!
Last edited by PipDiddy; 05-25-2010 at 09:55 PM.
"The only cable I watch is the pound baby."