The weaker than expected UK GDP data will dampen immediate speculation that the Bank of England will need to move more quickly than expected towards a tightening of monetary policy. The political developments will be watched closely and markets may now prefer to take a wait and see attitude with the election now less than 2 weeks away. Given the underlying fundamental vulnerability, Sterling is unlikely to make much headway and the net risks suggest that any weekend developments will be negative for the UK currency. In this context, look to sell GBP/USD in the 1.5390 area.
A generally firmer dollar pushed the UK currency to lows around 1.5340 on Thursday before a small recovery. Sterling was able to strengthen to a 2-month high against the Euro before a slight correction.
Political developments will continue to be watched closely and further evidence of an indecisive outcome for the May 6th vote would tend to curtail Sterling support. Euro trends remained dominant on Friday with the UK currency drifting weaker against the dollar.
The latest GDP data was weaker than expected with a preliminary figure of 0.2% for the first quarter compared with expectations of a 0.4% advance. This will dampen confidence to some extent, although the impact may be measured for now as the figure will have been dampened by bad weather.