Currency watch: GDP shock rocks the City

There’s nothing like a surprise to get the markets going is there? Tuesday’s UK GDP announcement was certainly a shocker with traders now abandoning all hope that the Bank of England will raise interest rates sooner rather than later – a factor that had been supporting the pound of late.

This opens the door to "stagflation" – a combination of high inflation and stagnant growth – which would see the economic recovery snuffed out.

To be honest, although this is only a preliminary figure, it does give us cause for concern. However, preliminary figures have a habit of being revised higher.
 
Focus soon switched to Mervyn King and the rest of the Monetary Policy Committee as Andrew Sentance was joined in the rate-hiking group by Martin Weale.

Meanwhile Adam Posen stuck to his guns in asking for further Quantative Easing and the rest decided to do nothing. This sets up a very interesting February for the pound; a month that will be very much "make or break".

Jeremy Cook is chief economist at World First foreign exchange