The GDP figure for the UK has come out sharply lower than expected (-0.4% vs. an expectation of a 0.2% rise). This has lead to a sell off in the pound with GBP/EUR back below the 1.10 level and GBP/USD also falling over 1% in the space of 2 minutes.
This dramatically increases the chances that we will see an expansion of the Bank’s Quantitative Easing program following the inflation report in November. This would extend the pressure on sterling with falls to 1.06 against the euro and 1.60 against the USD likely and the possibility of parity against the European single currency once again as we move into the Christmas period. This will not be a slow slide but instead could turn into an avalanche of sterling negativity.
This move has put GBP through recent technical levels that will act as a hindrance to any sterling strength in the near future.