Sterling dipped from a three-week high versus the dollar on Wednesday ahead of the release of UK growth figures expected to show the economy contracted in the final quarter of 2011. Economists forecast a 0.1% GDP decline, fueling speculation the Bank of England will announce more monetary stimulus at its next meeting. Minutes from the latest BOE policy meeting, also due Wednesday, are expected to confirm a dovish tone. Analysts said the pound is vulnerable to selling on weak GDP data and dovish BOE signals, but downside may be limited as bad news is already priced in.

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Wednesday 25th January 2012
Sterling dipped from a three-week high versus the dollar on Wednesday, and looked likely to stay
under pressure ahead of the release of UK growth figures later in the session that are expected to
show the economy has contracted.
Economists are forecasting UK gross domestic product to have declined by 0.1 percent in the final
quarter of 2011, a reading that would increase speculation the Bank of England is preparing to
pump more money into the economy to boost growth.
Minutes from the BoE's latest policy meeting, also due today, are expected to confirm a strongly
dovish tone from the central bank.
Analysts said sterling was vulnerable to selling if GDP figures and BoE minutes paint a bleak
economic picture, but with much of the bad news already priced in the extent of any fall would be
limited.
"The market is braced for a negative number and at the same time braced for a signal that
quantitative easing will get extended at the next meeting next month," said Gavin Friend, currency
analyst at National Australia Bank.
National Australia Bank's Friend said he expected sterling to perform worse against the euro than
the dollar if GDP numbers surprised to the downside, with 84.00/25 pence seen as a reasonable
target.
In a speech on Tuesday BoE Governor Mervyn King said the central bank had scope to give the
economy another cash boost if needed as inflation is falling and Britain faces an "arduous, long
and uneven" economic recovery.
His comments added to expectations in the market that policymakers would announce a further 50
billion pounds of quantitative easing next month in a bid to boost the economy.
The last round of QE in October did not weigh significantly on sterling but analysts said the need
for further economic stimulus added to a shaky outlook for the pound.
Exchange Rates
GBP – EUR: 1.1997 GBP – JPY: 121.79 CAD – USD: 0.9867
GBP – USD: 1.5581 EUR – USD: 1.2985 GBP – ZAR: 12.419
GBP – AED: 5.716 EUR – JPY: 101.43 AUD – USD: 1.0479
GBP – CHF: 1.4502 EUR – AUD: 1.2388 GBP – NZD: 1.9283
GBP – AUD: 1.4861 EUR – NZD: 1.6072 GBP – CAD: 1.5789
The rates above are for indication purposes only. Price can vary dramatically based on amount and delivery date.

2. Economic
Data
United
09:30 Bank of England Minutes
Kingdom
United
09:30 BBA Mortgage Approvals (Dec) 36.2K 35.3K 34.7K
Kingdom
United Gross Domestic Product (QoQ) (Q4)
09:30 -0.2% -0.1% 0.6%
Kingdom Preliminar
United Gross Domestic Product (YoY) (Q4)
09:30 0.8% 0.8% 0.5%
Kingdom Preliminar
United
09:30 Index of Services (3M/3M) (Dec) 0.1% 0.4% 0.2%
Kingdom
United CBI Industrial Trends Survey -
11:00 -18% -23%
Kingdom Orders (MoM) (Jan)
United
12:00 MBA Mortgage Applications (Jan 20) 23.1%
States
European
13:15 Monetary ECB President Draghi's Speech
Union
United
15:00 Housing Price Index (MoM) (Nov) 0.1% -0.2%
States
United
15:00 Pending Home Sales (MoM) (Dec) -1.0% 7.3%
States
United
15:30 EIA Crude Oil Stocks change (Jan 20) -3.438M
States
United
17:30 Fed Interest Rate Decision (Jan 25) 0.25% 0.25%
States
United
19:15 Fed's Press Conference
States
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