GBPEUR/GBPUSD
The Pound declined against the 16 most actively traded currencies this morning, falling over 1% versus the Euro, after a report from the Office of National Statistics showed that the UK economy returned to growth by less than economists forecasts. Gross domestic product rose just 0.1% in the fourth quarter, as service industries and manufacturing expanded enough to pull the economy out of the longest recession on record.
The UK currency also slumped 0.5% against the U.S Dollar, as the data disappointed investors who had anticipated a 0.4% increase, while the lowest prediction was for a result of 0.2%. Bank of England policy makers will look at the data as they assess the strength of the economic recovery and decide next week whether to exit quantitative easing and withdraw emergency stimulus measures.
The weakness of the pickup in GDP has led to speculation that policy makers won’t raise interest rates any time soon and may even implement further bond purchasing to cement the recovery. The recession, which lasted for six consecutive quarters, has reduced GDP by 6%, as the economy shrank 4.8% in 2009, the biggest annual drop since records began in 1949.
The data was the first for the fourth quarter from the Group of Seven nation and means that Britain is the last of the major economies to exit the recession. The Pound has declined on speculation that the recovery isn’t particularly strong and Euro and Dollar buyers may wish to take advantage of the current rate or at the very least consider the benefits of a stop order before a sustained decline.
written by Adam Solomon
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