Sterling hit a 6 week high yesterday against a broadly weaker US dollar after UK GDP figures came in higher than expected investors dumped the US currency over fears of a US default. Data released yesterday morning showed that the UK economy grew by a mere 0.2% between April and June as industrial output shrank. However, the consensus expectation was GDP growth of 0.1% but many analysts had been braced for shock figures that showed a contraction. Therefore, despite 0.2% being a pretty abysmal figure, sterling jumped against the euro and US dollar. Sterling has benefited from being the ‘best of a bad bunch’ in recent weeks as markets applaud the UK’s austerity measures over the euro zone debt crisis and the deepening US debt crisis. However, as the figures show, what is holding the pound back from a significant rally against the euro and US dollar is weak growth. Call in now for a live exchange rate.

In the euro zone, the euro jumped against the US dollar, breaking the $1.45/€1 level as markets became concerned over the lack of an agreement over the US debt ceiling. There are concerns that the deadlock will mean that the US government misses a debt repayment next week for the first time in its history. Aside from US and UK GDP news, there was surprisingly little European news. German consumer confidence slipped slightly which is understandable given the panic over the Greek crisis in previous weeks. Call in now for a live exchange rate.

In the USA, the impasse reached in Washington over the spending cuts and tax increases seems to get harder and harder to break. Essentially, neither the Democrats nor the Republicans are willing to compromise with the other party over their plans to bring down the deficit which seems to rest on the fact that the Republican senators (unsurprisingly given the higher number of Republican millionaires in the Senate) do not want to increase taxes on the wealthy. This could get rather messy over the next few days so ensure you speak to one of the team to stay on top of market movements.

Elsewhere, the Swiss franc gained as investors looked to safer haven currencies and in a new twist to current trends, the New Zealand and Australian dollars advanced against the US dollar as Asian sovereign investors looked to diversify away from the US dollar as the reserve currency of choice. Call in now for a live exchange rate.

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