FX round-up: Sterling nonchalant after UK Q1 growth disappoints
By Andrew Schonberg
Date: Friday 28 Apr 2017
(ShareCast News) - Sterling made steady gains on most key cross on Friday, appearing nonchalant in its reaction to disappointing UK economic growth data out mid-morning.
At about 17:04 BST, sterling was up 0.28% to $1.2940, and up 0.09% to €1.1879. The dollar-spot index was down 0.02% to 99.054. Sterling also rose on the aussie, loonie, kiwi, rand and yen.
Jasper Lawler, senior market analyst at London Capital Group, said sterling was nonchalant about the UK economy slowing significantly in first-quarter 2017.
GDP growth was 0.3% in the first three months of the year, missing expectations for 0.4% growth and slower than the 0.7% growth seen in the final quarter of last year.
"Sterling hardly moved on the data because a modest slowdown is already priced in," he said.
"Both the pound and the euro have broken out above significant resistance levels this week as election fever boosts sentiment. Levels of $1.30 in GBPUSD and €1.10 in EURUSD are key."
Michael Hewson, chief market analyst at CMC Markets UK, was another who noted that sterling had shrugged off the slowdown in UK Q1 gross domestic product.
"It is also important to note that the first quarter tends to be a little weaker on a seasonal basis given that consumers tend to pull back at the beginning of a new year," said Hewson.
This was in order to rebuild their finances after Christmas.
Meanwhile, the US dollar turned in a motly performance on key crosses, falling on the euro, aussie and rand, but rising on the loonie, kiwi and yen.
In the US, GDP expanded 0.7% in the first quarter of 2017, preliminary official data showed.
That was wide of the 1.2% growth that economists had expected and less than the 2.1% rise seen over the previous quarter.
"If anything the dollar reacted fairly well, shrinking its losses against both the pound and the euro once the figure was released," said Connor Campbell, financial analyst at Spreadex.
A distinct cloud of caution hangs over global markets, with Brexit and the UK general election, France's presidential vote, Donald Trump's presidency and other geo-political factors weighing on investor sentiment.
Lawler said the rising risk of a war between the US and North Korea was keeping gold, which often ran counter to the US dollar, well bid.
"Whether gold holds above $1260 per oz will depend on next week's Federal Reserve meeting but the situation in the Korean peninsula should keep a floor under it."
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