The pound strengthened for a fourth day against the dollar, approaching a four-year high, as investors added to bets on faster U.K. economic growth.
U.K. gross domestic product rose in the first quarter at a slower pace than analysts expected reaching 0.8% up from 0.7% however expectations were anticipating growth to reach 0.9%.
The year-on-year growth rate was 3.1%, the fastest in six years, but again below forecasts for 3.2% growth.
The economy is still smaller than it was before the recession in 2008 but analysts expect the UK to be where it should be by mid-2014
German inflation increased less than economists forecast in April, adding pressure on the European Central Bank to add stimulus within areas using the euro.
The data deeply disappointed markets causing the euro to weaken against both the US dollar and against the pound.
The overriding theme in the Eurozone continues to be whether Mario Draghi and the ECB take any stimulus action to combat deflationary pressures.
This morning data from the Eurozone has been fairly mixed. German unemployment remained at 6.7%; Italian inflation didn’t fall as much as expected but Eurozone inflation failed to rise as much as analysts were expecting.
Expectations were for a rise to 0.8% but the data came in at 0.7%. The euro dipped initially off the data as it adds to the argument the Europe risks sinking into a deflationary slump – and thus might cause the ECB to take action to stimulate the economy.
13.15pm – USD – ADP Employment Change (Apr): Expected to rise to 210,000.
13.30pm – USD – Gross Domestic Product (Q1): Expected to fall to 1.2%.
19.00pm – USD – Fed Monetary Policy Decision.