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13 July 2010

Forex markets accross the board were rather mixed after yesterdays close in London, with the Pound confined to tight ranges particularly as the Euro halted its 5 day rally against its counterparts.

Sterling fell to a low against the dollar of $1.4946 in the wake of the release of the UK final Q1 GDP data, which highlighted the fragility of the UK’s economic recovery. It bounced back only to fall again in later trading after S&P announced that it was maintaining its negative outlook on the UK’s AAA credit rating. This will play a key role in Sterling price movement over the coming weeks, with many analysts and investors remaing cautious of a possible downgrade which will weigh heavily on the Pound.

Final UK Q1 GDP data was released yesterday however the expectation was largely factored into the Pound’s price level. While the quarterly growth rate was unrevised from the previous 0.3% rate, the data highlights the fragility of the economic recovery and the underline concerns about its sustainability that have been pressurising sterling and its price movement over the last 5 days.

Taking centre stage in the calender this morning was the release of UK CPI. According to the figures from the Office for National Statistics, consumer prices rose 0.1% in June following 0.2% rise in May. The government’s inflation gauge, the annual CPI ticked slightly lower to 3.2% from 3.4% in May yet still higher than the expected drop to 3.1%.

The Euro gained 0.1 percent in overnight trade, moving back above the 1.26 level against the USD and trading at 1.1985 against the Pound, which currently offers a 4 point difference from the high of 1.24 and above for any sellers. The move with the Euro yesterday was largely technical in nature, with speculative positions in the market taking profit from the highs and lows. Earlier in the US session, EURUSD managed to hold onto support near 1.2550, which spurred a bit of technical buying however remains down by 0.2% from todays opening.

If you would like to discuss your requirement with me further or if you would like a live trading quotation against any of the 16 most actively traded currencies do not hesitate to contact me on my direct line +44 (0) 1736 335264.

Tom Trevorrow

Currency Analyst at Tor FX Currency Exchange

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