(eToro Blog) Coming as a relief to investors, the U.K.'s Office of National Statistics released preliminary GDP data earlier today which was very much in line with analysts' expectations. For the first quarter of 2011, the U.K. economy grew 0.5% essentially erasing the contraction of the last quarter of 2010. As compared to the same period a year ago, the economy expanded 1.8% an increase of 0.3% from the period ending March 31, 2010. With the news, the London FTSE moved higher.The Eurozone's ongoing fiscal problems continue to weigh on the Pound, especially given the exposure of U.K. banks to Greek bonds.

Yesterday, Moody's the ratings agency, warned that it is considering downgrading several U.K.-based banks, including Lloyds Bank Plc and the Royal Bank of Scotland.However supported by the positive GDP data , bullish sentiment has regained the upper hand.

Also weighing heavily on the London markets is the release of key housing data due on Friday morning. Should the data be in line with expectations it will confirm that the U.K.'s housing sector is seeing some recovery in spite of the tepid growth and the government's austerity measures. The consensus of a recent poll shows that analysts are expecting housing prices to edge slightly higher to 0.1%, an improvement from the -0.2% decline in the previous month.

A strong recovery in the U.K. housing sector is key for recovery of the economy as a whole, and data in line with analysts' expectations could push the Pound Sterling into bullish trend. Conversely, if the reality doesn't match expectations the Pound is likely to fall to support levels yet again at 1.6

Sentiment Is Bullish- Overall our view is rather bullish and we expect the Sterling to gradually regain strength. On the technical aspect support is seen at 1.61 again the Dollar with the 1.64 as the next target. Investors will eye housing data on Friday looking for a proof the UK is on a stronger footing and any surprise for the better should provide the additional momentum to breach the 1.64 level and test the next resistance at 1.68 The Sterling now seen support On the eToro trading floor sentiment among investors of the FTSE, currently higher at 5878.76 points, is unanimously bullish with 10 buyers to 0 sellers. Among traders of GBP/USD, recently higher at 1.6269, sellers outnumber buyers by 8 sellers to 5 buyers.

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