Heading for its most prolonged rally in over a year, sterling strengthened Friday breaching resistance levels not seen since January 1981. Europe?s second-largest economy expanded for its sixth consecutive quarter lifting cable to trade at $2.0561 in the Wall Street afternoon.
[B][U]UK Headlines:[/U][/B]
[B][I]GBP/USD Third Quarter FX Outlook[/I][/B]
After reaching fresh 26-year highs of 2.0402 against the Dollar, some analysts see the pair as being top heavy and ready to retrace some of its gains. Interest rates remain the key to further pound strength and with US short term rates having reached their peak, the GBP/USD could hold at lofty levels. Continued spread widening leaves the strong GBP/USD in play, but as heavy resistance sits just above current price, such an outlook clearly depends on the future of short-term interest rates.
[I]-Source: DailyFX[/I]
[B][I]UK Quarterly Economic Growth Unexpectedly Quickens[/I][/B]
UK economic growth unexpectedly quickened in the second quarter as manufacturing rebounded, evidence that higher interest rates have yet to cool expansion. Gross domestic product increased 0.8 percent, compared with 0.7 percent in the first quarter, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 36 economists was 0.7 percent.
Bloomberg - Are you a robot?
[I]-Source: Bloomberg[/I]
[B][I]No charges In Cash For Honours Row[/I][/B]
Prosecutors announced on Friday they would not file charges after a 16-month police inquiry into alleged political corruption that overshadowed former Prime Minister Tony Blair’s last months in office. The decision is a boost to the ruling Labour Party and to new Prime Minister Gordon Brown.
[I]-Source: Reuters UK
[/I] [B][U]UK Market Activity:[/U][/B]
[I][U]Currency Markets:[/U][/I] [B]GBP
[/B]Heading for its most prolonged rally in over a year, sterling strengthened Friday breaching resistance levels not seen since January 1981. Europe?s second-largest economy expanded for its sixth consecutive quarter lifting cable to trade at $2.0561 in the Wall Street afternoon. Gross Domestic Product was forecasted to print 0.7 percent in the three months of June and annual growth of 2.9 percent but figures defied analysts? expectations and was released at 0.8 and 3.0 respectively. Above trend growth, in conjunction with a firmer outlook for UK lending rates have traders bidding up sterling which is up over 1.5 percent this week alone.
[I][U]Equity Markets:[/U][/I] [B]FTSE 100
[/B]Top London equities closed down 0.83 percent to 6585.20 in a volatile session. Peaking at 6674.30 the benchmark FTSE 100 index is negative 1.68 percent this week. Paced by Britain?s second-largest phone company Cable & Wireless -3.6 percent to 182p, the FTSE has struggled to gain traction on the back of expectations of 6.00 percent market rates by years end. Cable & Wireless is currently in litigation global telecommunication firm Digicel Group who claims Cable & Wireless impeded its entrance into key markets.
[I][U]Fixed-Income Markets:[/U][/I] [B]10-Year Long Gilt
[/B]Credit market jitters continue to plague risk averse investors with many flocking to long government debt issues as a safe haven. The yield on the benchmark 10-year gilt plummeted 11bp in today?s session to 5.297 percent, it?s most substantial decline since November 2005. Donning a deficit of 18 basis points on the week, comparative yield differentials continue to support the sterling going forward.
