GBPUSD dips back to 1.5059

After attempting to find its feet around the 1.51 region earlier this morning, the GBPUSD pulled back to a daily low at 1.5092 following the annualised UK GDP for the 4^th quarter data falling slightly below expectations. The market forecasts were for the UK GDP figure to come in at an annualised 2.8% reading, whereas the actual figure was 2.7%. Although GDP growth at this rate is nothing to be concerned about, what the reading has achieved is provide further evidence of UK domestic momentum slowing down and basically also provide further confirmation that the chances for a Bank of England (BoE) interest rate rise this year are becoming obsolete.

As previously mentioned, there is a negative sentiment towards the GBP which is greatly reducing investor attraction towards the currency. This sentiment spreads across a variety of different issues because it is not only slowing domestic economic growth that is causing concern among GBP investors. For example, we also have the issue surrounding the UK encountering deflation risks. UK inflation has already fallen to a 12-year low but there is a consensus that it will further weaken in the coming months, which will only continue to strengthen the BoE’s already strong views on inflation. Not only this but there is a UK general election in around four months and after all the unexpected volatility in the Scottish Referendum last September, investors are likely to be more hesitant to enter the GBP until potential political uncertainty clears up. As has been the case since the end of last year, GBPUSD upside potential does appear to be limited to USD weakness.

It also appears that the increasing investor interest in Gold following the unexpected move from the Swiss National Bank (SNB) is starting to erode. After approaching $1302 on Friday, the metal has declined to $1272. This week sees a far higher quantity of US economic data, therefore any potential USD movement will be the main catalyst behind where Gold trades over the upcoming days. Although economic releases such as Durable Goods and Consumer Confidence are rightly considered high-risk, what investors will really be looking towards is the FOMC statement on Wednesday evening. If the Federal Reserve continue to reiterate the same message that it has every intention to begin raising US interest rates in the upcoming months, metals could come under pressure.

Written by Jameel Ahmad, Chief Market Analyst at FXTM.

Follow Jameel on Twitter @Jameel_FXTM

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