Dec 22, 2009

Forex Crunch British Recession still hurts the Pound

Forex Crunch British Recession still hurts the Pound

British Recession still hurts the Pound

Posted: 22 Dec 2009 03:28 AM PST


Every GDP release in Britain reminds us that Britain is still in recession. Today’s final release of the Q3 GDP brought another disappointment, sending GBP/USD below 1.60. But according to unofficial numbers, there is a light at the end of the tunnel.

Contrary to other countries in the Western hemisphere, Britain is still in recession. The US, Canada and Europe are out of recession as of Q3. Japan already concluded the recessionary chapter in Q2, and Australia never dipped into recession, with only one quarter of contraction.

The British economy is still shrinking in Q3, and every release is painful: the first release was the biggest shock, when a 0.4% contraction was reported. The revised version was better, only 0.3%, but reminded us that Britain still suffers.

The release of the final version today held hopes of a narrow 0.1% contraction. The outcome was 0.2%. This may sound like a small difference, but it’s still worse than expected and it still hurt the Pound.

GBP/USD dipped under 1.60 for the first time October 14th. It’s erasing all the comeback. Currently a little bit above 1.60, the huge support line lies low enough: at 1.5720. But the release of the GDP today establishes the break of 1.6110, that wasn’t secured on Friday.

The forex market volume has already fallen towards the holidays, and a strong move downwards isn’t expected.

There is a light at the end of British tunnel: the NIESR institute showed that the British economy grew in the three months that ended in November. This includes October and November of Q4.  So, growth in Q4 looks real.

If the upcoming release by NIESR for Q4 shows growth, the official number should confirm that and Britain will be out of recession, and the Pound can lift its head.

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Forex Daily Outlook – December 22nd 2009

Posted: 21 Dec 2009 02:00 PM PST


We already have a busier day today, with GDP releases from the US, UK and New Zealand, among other events. Let’s see what’s up for today:

European figures start arriving today: the GfK German Consumer Climate is expected to tick down to 3.6 points. This follows similar eases last week. Check out Casey Stubbs’ analysis for this pair, as it struggles in lower ground.

Later, the NBB Business Climate will arrive from Belgium. It’s expected to advance from -8.8 to -4.3 points, still in the negative zone.

For more on this week in the Euro, check out the EUR USD forecast.

In Japan, BOJ Governor Masaaki Shirakawa will be speaking just before Japan goes on holiday to celebrate the emperor’s birthday. Swiss Trade Balance is predicted to show a growing surplus, something that will push the Swissy higher.

British Current Account is predicted to show a smaller deficit, of only 8.1 billion pounds. This is expected to help the Pound rise higher.

At the same time, Final GDP is released in Britain. After the Q3 disappointed with the news of an ongoing recession with a contraction of 0.4%, the revised version showed a better number – a 0.3% contraction. The third and final release is predicted to show that the British economy shrank by only 0.1% in Q3.

For more on the Pound, read the GBP USD forecast.

Also in the US, Final GDP is due. Here, the initial release showed an annual growth rate of 3.5%, but this was revised sharply down to 2.8%. The final release is expected to repeat the revised version – 2.8% growth in Q3.

Later in the US, Existing Home Sales will impact currency trading: they are expected to rise from 6.10 to 6.31 million, after jumping last time.

New Zealand closes the day with its own GDP release for Q3. Growth is expected to accelerate to 0.4%, after a 0.1% growth in Q2. NZD/USD will shake on any result.

That’s it for today. Happy forex trading!

Want to see what other traders are doing in real accounts? Check out Currensee
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