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Pound Recovers Despite Deepening Recession

British Prelim GDP, came out worse than expected, yet the Pound is recovering and reaching last week’s levels. Here’s a roundup of the latest events in the critical week for the Pound.

The critical week for the Pound came to an end with the Prelim GDP – the main gauge of economic activity. British GDP fell by 1.9% in the first quarter of 2009 – worse than early expectations of 1.5%, and worse than 1.6% in the last quarter of 2008. Recession in Britain is deep. There’s a good reason to pound the Pound!

At the same time, another important indicator, Retail Sales, was released in Britain, and it was surprising – it rose by 0.3% instead of an estimated fall of 0.3%.

Naturally, GDP is more important, and the Pound fell immediately after the release. In a very shaky trade, it fell in the hours after the release, dipping to 1.4577 during the day.  

But this didn’t hold. At 12:#0 GMT, American  Durable Goods Orders and Core  Core Durable Goods Orders were published. Both figures were positive –  Durable Goods Orders fell by only by 0.8%, better than the expected fall of 1.4%.  Core Durable Goods Orders, the more important figure, fell by 0.6%, half of early expectations at 1.2%.

These two good American figures increased risk appetite. Traders felt relaxed on good American data, and flocked away from the dollar. GBP/USD made a big U-turn upwards almost 200 pips!

Currently, GBP/USD trades at 1.4714, very close to last week’s close at 1.4795. There are still a few hours till the end of forex trading, and there still could be a move sparked by Geithner’s speech at the end of the G7 meetings, but trading will be thin, and I can start concluding the critical week for the Pound:

All in all, it’s been an exciting week for traders of the cable. The trend was more bearish than bullish, but there isn’t a clear new direction. The Comeback of the Pound won’t continue so fast

Also the Euro had interesting week. I’ll cover it later…

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.