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Weekly roundup: Pound rallies on smaller UK GDP contraction

currency-newsWeekly roundup: Pound rallies on smaller UK GDP contraction
A smaller-than-expected contraction in the fourth quarter UK GDP helped to boost the pound against its rivals.
 
As growth clocked in at -7.8% on the year, rather than the -8.1% forecast, this suggested that the economy held up better in the final three months of 2020 than previously thought.
 
With the quarterly growth rate also exceeding expectations, remaining firmly in positive territory, the risk of a double-dip recession receded.
 
Although signs still point towards the UK economy experiencing a fresh slowdown in the first quarter of 2021 thanks to tightened lockdown conditions, this was not enough to dent the Pound ahead of the weekend.
 
However, with forecasts pointing towards January’s inflation rate dipping from 0.6% to 0.5% on the year, the mood towards the pound could soon sour.
 
Evidence that inflationary pressure started to falter once again this year may give Bank of England (BoE) policymakers fresh cause for anxiety, keeping alive the possibility of future policy action.
 
Even as the successful rollout of Covid-19 vaccines continues across the UK, this may not be enough to shore up the pound in the face of disappointing inflation data.
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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