The U.K.'s Office for National Statistics earlier today released 1st quarter GDP results for the U.K. economy, and as forecast by economists' consensus, the economy expanded 0.5%. Comparatively, that increase was equal to the percentile decline in the last quarter of 2010. According to the press release, the services sector expanded by 0.9%, the most in nearly 5 years, with the surge clearing contributing significantly to GDP growth. As analysts have well noted, the U.K.'s economy is a dynamic economy with surprises - both good and bad - can be seen at any time.

One analyst in London commented that the news of the expansion will likely come as a relief to investors, many of whom expected less expansion in the quarter. That relief is already being seen with the U.K. FTSE trading higher and the Pound Sterling snapping three days worth of declines against the Euro, and even the ever-weakening U.S. Dollar. Market players have reduced their short Sterling positions as the GDP data supports the likelihood that the Bank of England will likely to be the next central bank to raise interest rates.

In the FX arena the sterling reacted rather strongly to the news, squeezing short sellers and rising more than 100pips in a matter of minutes.Sterling Dollar trade rebounded from the 1.64 level all the way up to 1.658 and GBPJPY sliced through the 136 level, rising more than 200pips in the last 3 hours. On the eToro trading floor reaction to the news was quick with traders flipping from net short Sterling to long GBPUSD with a ratio of 300 buyers to 10 sellers.