British Pound (GBP) Exchange Rate Fluctuates after Below-Forecast UK GDP
During European trading the British Pound (GBP) put on a patchy performance following the release of UK growth data.
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Sterling initially softened against the Euro (EUR) and the US Dollar (USD) and after the UK’s GDP report for the first quarter showed expansion of 0.8 per cent, slightly less than the growth of 0.9 per cent anticipated.
The result disappointed the Bank of England’s more optimistic prediction for growth of 1.0 per cent.
On the year, the UK economy grew by 3.1 per cent, up from 2.7 per cent in the fourth quarter of 2013 but less than the 3.2 per cent expected.
If quarterly growth had come in at 0.9 per cent it would have been the strongest since 2010.
However, the result does mark a fifth consecutive quarter of GDP growth – the longest run since before the onset of the global economic crisis in 2007.
Chancellor of the Exchequer George Osborne said this of the data; ‘Today’s figures show that Britain is coming back. The impact of the Great Recession is still being felt, but the foundations for broad-based recovery are now in place.’
Similarly, Larry Elliott of The Guardian noted; ‘There is now growth across virtually the whole economy. Most of the expansion between January and March was accounted for by services […] parts of the service sector – housing, retailing, business services – all performed strongly.
‘Construction was a tad weaker than expected, with the 0.3 per cent growth perhaps suggesting that increased demand for property has yet to feed through into higher house building.’
After the report was published, industry experts stated that they envisage the Bank of England introducing its first interest rate increase before February 2015.
The Pound remained weaker against the Euro ahead of the release of German inflation data and held declines against the US Dollar.
Later today additional GBP/USD movement could be triggered by the release of US consumer confidence data.
The sentiment gauge is expected to have risen from 82.3 to 83 in April.
Of course, investors will also be looking ahead to tomorrow’s influential economic reports.
UK news is thin on the ground but the German employment, Eurozone inflation and US GDP figures could have a considerable impact on currency market movement.
The Federal Open Market Committee’s rate decision, due for release tomorrow at 19:00 GMT, will be of particular interest.
The central bank is expected to continue with the steady tapering of easing and leave interest rates unaltered.
Over the next few days the Pound could recover losses if UK manufacturing and construction PMI figures impress.
The British Pound is currently trading against the Euro in the region of 1.2123 and trading against the US Dollar in the region of 1.6803.