Currency watch: Winter woes were snow joke

After the stormy waters of last week and the unexpected fall in GDP, the data for the UK has once again turned positive as it seems that the weather really was to blame for December’s terrible economic woes.

Sentiment releases from the manufacturing, construction and services industry have all shown a recovery in the first month of 2011, after what was a pretty catastrophic Christmas period.

This has seen the pound bounce back to three-month-highs against the US dollar, with some commentators thinking the GBP/USD rate could rally towards the 1.68 level in the coming months – a rate not seen since Nov 2009.
 
“While gains have been seen against the dollar, a similar advance against the European single currency has been harder to come by. The euro has been the surprise package this week as it too made multi-month highs against the US dollar despite a ratings downgrade for Ireland.

Standard & Poors also maintained the outlook at negative, signifying that further cuts are likely unless the economic house looks like it’s being put in order.

The euro has also been one currency to benefit while the problems in Egypt continue to rattle onwards, although we believe that should similar protests be seen in countries closer to the Union’s periphery this will change.

Jeremy Cook, chief economist at World First foreign exchange, 04.02.2011