The Pound started and ended the week in virtually the same place against the Dollar after anticipation of favourable GDP figures failed to result.

Sterling fell sharply against the Dollar on Friday after figures showed that the UK economy is still in recession. An advanced estimate of third-quarter Gross Domestic Product showed that the economy contracted by 0.4%, a sixth consecutive quarterly decline marking us in the longest slump since records began.

The market had been expecting positive news, especially after Wednesday’s MPC minutes showed a 9-0 vote to keep rates on hold and Cable had been making good progress reaching interbank highs of 1.67. However the disappointing figures triggered a huge Sterling sell off on Friday and into this week - Furthermore the data adds weight to the argument that the Bank of England should extend Quantitative Easing measures at its next policy meeting on 5th November.

This is a bitter blow for those Dollar purchasers who have been waiting eagerly for the 1.70 level. However those purchasers who took advantage of using a Stop Loss order after the gains earlier in the week will have minimized their losses against this recent current fluctuation.

Whilst the US Dollar's weakness has been somewhat less visible against Sterling due to huge Sterling weakness, the currency’s relative underperformance in a global context was clear last week as the Euro's value rose above 1.5 US Dollars for the first time in fourteen months.

The Dollar generally began to weaken off last week against a basket of currencies as investor appetite started to grow. As a result investor’s started to pull funds from the Dollar which have been seen as a safe haven currency and moved into riskier assets. Federal committee Policy members however remained cautious, indicating that growth in 2010 would be slow. Despite these comments ‘New Homes Sales’ were still recorded as their highest monthly rise since 1999.

This week it is the turn of the US for their third-quarter preliminary estimate of GDP on Thursday. The expectation is that we will see the US returning to growth and if so we will probably see further downward pressure on Sterling, but given the upset in the UK last week the markets will be watching with interest.

For those looking at buying Dollars the cautious move would be to purchase early in the week before the results are posted. However, for those who wish to test the market a little and wait for the GDP announcement to happen, make sure you speak to you FCG Account Manager to discuss placing a Stop Loss Order and a Limit Order to protect yourself against losses if the markets fall and capitalise on your position should the market spike.