By Claire West

Sterling jumped instantly as the preliminary GDP figure for Q2, beat market expectations.

Data published this morning showed that the figure was expected to come in at 0.6%. However, it was revealed to be almost twice as high at 1.1%. This is a marked improvement on the Q1 results of 0.3%. The increased number will re-assure investors that the UK economy is recovering faster than the market expected and has already given sterling a boost.

Tom Hampton, currency analyst at Caxton FX said: “Following the announcement, sterling jumped up across the board. Sentiment that the UK economy is pulling out of recession better than most is growing, and as countries like the US continue to publish poor economic data, the pound will continue to benefit”

"Sterling and the euro are seemingly leading the way in the global recovery as positive GDP data from the UK and solid manufacturing and service data from the eurozone far outstrip that from the US. Over the past couple of months, the US economy has stumbled and there is talk of a re-introduction of quantitative easing. Dovish sentiment from the Fed Chairman over the past couple of days in his Monetary Policy speeches has also added to America’s woes,” continues Hampton.

The figures published this morning show that the UK economy and therefore sterling could be heading into a period of solid growth.

Hampton agrees, “Results today reaffirm our view that sterling will hit 1.22 against the euro in August and 1.27 by the end of the year. Against the greenback we could also see considerable growth as negative data continues to stream out of the US. This marks a shift in risk sentiment as stock markets continue their ascent.”

Sterling is currently trading up at well over a cent and a half against the US dollar. Against the euro, which also has gained on the day after good business climate figures from Germany, the pound is up almost a cent.


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