Reality check for the Pound

After riding on dollar weakness, the Pound got a reminder of the grim reality – the country is still in recession. The reaction was a retreat of the Pound.

According to the revised version of GDP, or the second release, the British economy squeezed by 0.3% in the third quarter of 2009. Some of the world’s biggest economies have ended their recession periods in Q2, and others in Q3. Britain is seriously lagging behind.

This figure was revised upwards from the preliminary release, that showed a contraction of 0.4%. The first release was very disappointing, and sent the Pound down by hundreds of pips.

Special weakness of the Pound

But also today, the Pound’s weakness stands out. The US dollar is on the retreat today, falling across the board. EUR/USD is above 1.50, AUD/USD is touching 0.93 once again and USD/CHF reached a year-to-date low of 1.0030, very close to parity.

Also the Pound gained from this dollar weakness, climbing 100 pips during the morning up to 1.6720. But this was before the release. After the GDP release, the Pound fell to 1.6670. The Pound is falling against other currencies as well: EUR/GBP is on the rise, and GBP/JPY is falling.

GBP/USD, like other currencies,  moves up and down on the dollar’s strength and weakness. But it also has its own problems, which are quite serious. Today we’ve seen how the Pound stood out – and fell.

For more on the Pound’s events this week, and a technical analysis, check out the GBP/USD forecast.

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