Surprise UK GDP downgrade weakens Pound

7 months ago


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Pound Sterling was on lacklustre form yesterday, after estimates for UK growth during the final three months of 2017 were cut lower
 


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Daily Market Analysis


February 23rd 2018

 

Surprise UK GDP downgrade weakens Pound



Pound Sterling was on lacklustre form yesterday, after estimates for UK growth during the final three months of 2017 were cut lower.


The pound is on mixed form this morning. The GBP/EUR exchange rate has risen 0.2% to €1.1336, while the GBP/USD exchange rate is down -0.1% to US$1.3938. GBP/AUD has climbed 0.1% to AU$1.7813, GBP/NZD is up 0.2% to NZ$1.9090, and GBP/CAD has fallen -0.1% to C$1.7716.


It was a busy day yesterday, so keep reading to find out the latest development on the currency markets…


 
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Today's Rate


Euro (EUR)
1.13397
US dollar (USD)
1.3948
Australian dollar (AUD)
1.7822
S. African rand (ZAR)
16.2482
Japanese yen (JPY)
149.098
View more rates


The rates above are using the British pound (GBP) as the base rate. All rates are for indication purposes only.
Prices can vary dramatically based on amount and delivery date.


 
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"The pound weakened yesterday after the Office for National Statistics (ONS) released its second estimate for UK GDP during the final quarter of 2017."



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What’s been happening?

The pound weakened yesterday after the Office for National Statistics (ONS) released its second estimate for UK GDP during the final quarter of 2017.


Growth was unexpectedly revised lower, with projections for quarter-on-quarter GDP cut to 0.4% from initial forecasts of 0.5% and year-on-year growth cut to 1.4% against the 1.5% pencilled in when the first estimate was announced.


This not only weakened the outlook for the UK economy going forwards, but also cast doubts over recent market confidence that the Bank of England (BoE) may raise interest rates again as soon as May.


This pushed GBP/EUR lower, despite the euro itself being on soft form thanks to a disappointing set of meeting minutes from the European Central Bank’s (ECB) January policy gathering.


The minutes revealed that policymakers rejected the idea of tweaking its policy language in order to slowly prepare markets for the eventual withdrawal of monetary stimulus, which has propped up the Eurozone economy for so long.


The fact that members of the Governing Council don’t want to sound even a little bit more confident may have weighed on the euro, but not enough to drag it lower against the pound.


However, GBP/USD was able to make a few gains on the back of disappointing monetary policy meeting minutes; this time from the Federal Open Market Committee (FOMC).


Markets weren’t entirely sure how to interpret the minutes, as they stated that the current economic conditions likely warranted ‘further’ monetary tightening, but also that any adjustments to monetary policy would be ‘gradual’.


The former suggests a more confident outlook, with policymakers maybe even hinting at more interest rate hikes this year, but the latter has been interpreted by some as an attempt to quell expectations of more than three hikes this year.


 
 
What's coming up?

There is no UK economic data on the calendar today, but Bank of England Deputy Governor Sir David Ramsden is set to deliver a speech on the topic of productivity at midday.


Lagging productivity is one of the UK economy’s main problems, as it holds back wage growth and therefore keeps inflation weak, so the pound could fall if Ramsden claims this problem is likely to persist for some time.


Today’s chunk of Eurozone data has largely been released, but there are still finalised versions of the January consumer price index due for publication, which could weigh on the euro, given the forecasts are for downwards revisions on most of the initial estimates.


Meanwhile the US economic calendar contains only speeches from Federal Reserve officials William Dudley and Eric Rosengren, with John Williams set to speak on the US economic outlook later in the evening.


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.


 
 


Reaz Rahman
Senior Dealer



Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.


  


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