GBP lower on UK growth fears

Sterling slumped on Friday as a downward revision to UK Q2 GDP reduced the odds of the Bank of England (BoE) looking to make any adjustments to interest rates in the near future.

As a new week of trading kicks off, GBP/EUR is trending in the region of €1.1357, GBP/USD is down 0.3% at $1.3352, GBP/AUD is lingering at the day’s opening levels of A$1.7073, GBP/NZD is steady at NZ$1.8560 and GBP/CAD has lost 0.2% to trade around C$1.6680.

Read on to find out what you can expect from the currency market today…

What’s been happening?

The pound registered losses of over 0.5% against a number of the majors on Friday as demand for the British currency was dented by negatively-revised UK growth data.

Q2 UK GDP had initially been estimated at 1.7% year-on-year, but this figure was slashed to 1.5%.

Given that this was the slowest rate of growth recorded since 2013, the result was enough to quash hopes of a near-term interest rate hike from the BoE, and Sterling slid accordingly.

Office for National Statistics (ONS) official Darren Morgan noted; ‘There was a notable slowdown in growth in the first half of 2017. The often buoyant services sector was the only area to grow in the second quarter, mainly due to increases in computer programming and retail.’

Meanwhile, the euro was supported by strong German employment data, while the US dollar was undermined by an unexpected slowing in the US personal consumption expenditure core index for August.

What's coming up?

The UK’s manufacturing PMI for September is likely to be one of the main causes of GBP exchange rate movement in the hours ahead.

The index is expected to decline slightly from 56.9 to 56.2, and such a result could have a negative impact on the pound.

Eurozone news to watch out for includes the region’s unemployment rate for August. The level of joblessness is expected to ease from 9.1% to 9.0% - a euro-supportive result.

Meanwhile, over in the US we’ve got the Markit and ISM manufacturing indexes and the nation’s construction spending report.

Any results which keep hopes of the Federal Reserve increasing interest rates for a third time in 2017 alive could boost the US dollar.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.