Pound Sterling Receives a Boost, Euro Hit by Fresh Concerns

Pound Sterling received a boost yesterday after the Office of National Statistics confirmed the initial third quarter GDP figure for the UK at 1%.

However, analysts were quick to point out that ‘one-off’ seasonal factors like the Olympics were largely behind the data.

Vicky Redwood, Chief UK Economist at Capital Economics said “Evidence is building that activity in the fourth quarter has relapsed. Indeed, with the fading of the Olympic boost likely to weigh on GDP in Q4, the MPC has said that it is braced for a contraction which is what we expect. A triple dip looms".

Dr Howard Archer, Chief UK Economist at IHS, said the overall figure "markedly overstated" the economy’s underlying performance during the quarter.

Archer said "Allowing for the various distortions to GDP in the second and third quarters, the overall impression is that the economy achieved modest underlying growth over the two quarters".

The euro was hit by fresh concerns about the late night deal struck in Athens on Tuesday on the lack of detail in the financial aid plan.

The deal was quickly and cheekily labelled a "new can-kicking world record" by Societe Generale chief currencies strategist Kit Juckes who said "The key issue for Greece, as for the rest of the euro zone, is the lack of growth. Today's optimistic mood will in due course be reversed unless someone comes along with a magic growth potion."

Sentiment was also hit by the latest Organization for Economic Cooperation and Development (OECD) warning about the potential for a global recession with its latest report predicting a "hesitant and uneven recovery over the coming two years," as it reduced 2013 growth forecasts for the world's advanced economies from 2.2% in May to 1.4%.

Otherwise, the markets are coming towards month end in a quiet, sombre mood with the majority of currency pairs trading within narrower than normal ranges.