GBP/USD has support at 1.5721, Friday's low and resistance at 1.5928, the high of February 8 and also the 3 month high.

Britain's economy shrank 0.2 per cent in the fourth quarter of last year compared with the third, official data showed, putting the country close to a return to recession. The Office for National Statistics (ONS) left its initial reading for gross domestic product (GDP) for the final three months of 2011 unchanged.

A further contraction in the first quarter of 2012 would place Britain back in recession, defined as two successive negative quarters. The ONS also revised down its growth estimate for the whole of 2011 to 0.8 per cent from the previously given 0.9 per cent. The British economy struggled last year amid harsh state austerity measures, falling consumer spending and the ongoing fallout from the long-running sovereign debt crisis in key trading partner the euro zone.

Economists said Britain's economic outlook was uncertain, despite recent encouraging industry data, with no resolution in sight to the euro zone crisis.

The pound rallied against the dollar on Friday, after official data showed that while U.K. gross domestic product contracted by 0.2% in the fourth quarter, consumer spending rose by 0.5%, the first quarterly increase in 18 months and exports jumped 2.3%.

In the euro zone, Greece launched a bond-swap offer to private-sector creditors Friday, formally inviting them to exchange their holdings of government debt for new securities.

Meanwhile, an auction of Italian government debt saw short-term borrowing costs fall, reassuring investors that the threat of contagion from Greece has abated.

The stronger tone of market sentiment was also supported by improving U.S. data. A report by the University of Michigan on Friday showed that its index consumer sentiment rose to 75.3 this month from 75 in January.


Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.