Pound nets some sly traders

It has not been the best of weeks for the pound to euro exchange rate, this partly due to broad based euro strength, but the outlook should prove supportive to sterling says Piet Lammens at KBC Markets:

"Interestingly, the swings in the dollar cross rates after the Hilsenrath headlines late in the US hardly affected EUR/GBP trading. Cable even jumped above the recent highs.

"This is, of course, mainly due to overall dollar weakness, but it also illustrates a constructive sterling sentiment.

"Today, the calendar in the UK is empty. So, sterling traders will look for a new equilibrium after publication of the Q2 GDP. In a somewhat longer term perspective, we consider the GDP report as (moderately) supportive for sterling.

"The report is strong enough for the BoE to be cautious on further monetary easing. The case for additional bond buying becomes thin. So, we don’t expect a sustained negative reaction from sterling once the overly long sterling position has been worked off."

Those sly traders…

Richard Driver at Caxton FX tells us some sneaky trading in the pound / euro exchange rate in the wake of yesterday's GDP numbers will have netted some traders a pretty penny or two:

"Sterling suffered early yesterday with GDP failing to arrive above the expected 0.6%. The move was capitalised by market short sellers who sold on the announcement and then bought back once the market had readjusted for quick gains.

"What could have propelled GBP/EUR to higher levels above 1.1650 and potentially beyond has now sent them below 1.16 as uncertainty over UK growth poses some difficult questions."

A quite day for currency markets

A quiet end to this week with some revised consumer sentiment data being released for the US at 14:55 today.

Yesterday was all important and with expectations of a strong GDP figure from the UK economy, the markets were sorely disappointed with the minimum expectation of 0.6% growth being realised for the second quarter.

Sterling was hit across the board as market players jumped at the opportunity for fast cash by shorting GBP, although this has most likely run its course and today should prove to be far more tranquil.