GDP Figures Suggest the Pound Could Face Challenges

As the session came to a close on Friday, the Pound found itself on the defensive following the reaction to the latest monthly GDP figures.

A 2.6% contraction was not as high as the original forecast but it indicated that the slump was big enough to cause a double-dip recession this winter. According to the Foreign Exchange Market, the currency rounded off the day at 1.1249 against the Euro and 1.3584 against the US Dollar.

There was selling pressure on the Euro following its negative correlation with the US Dollar, causing it to fall as the US Dollar became stronger. The political situation in Italy also weighed heavily on the single currency after the coalition was split, causing a potential political crisis. With the first policy meeting of the year for the European Central Bank taking place this week, it’s likely that the Euro will be governed by its outcome.

A drop in market sentiment resulted in the US Dollar pushing higher. This was mainly driven by the stimulus announcement from soon-to-be president Joe Biden while investors will have an eye on his first days in office this week.


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