GDP Growth Misses Target but Pound Remains High

Yesterday’s measure of economic growth in the UK, GDP, came in at 0.8% for the first quarter of 2014, marking the fifth consecutive quarter of growth – the longest since the financial crisis of 2008. However, analysts were expecting a slightly better figure of 0.9%, so at 9.30 yesterday when the figures were released we saw exchange rates fall back. As markets absorbed the news, the small discrepancy was shrugged off and exchange rates ended the day slightly higher.

The UK economy is now just 0.6% smaller than its 2008 peak, and George Osborne said that “Britain is coming back”, but that the recovery could still not be taken for granted. Doing particularly well within the figures was the manufacturing sector, which grew by 1.3%.

The Pound is now riding high, giving us the best rates for sending money to the USA since 2009, and for buying Euros we are now only 0.5c off the highs of the year. The expression ‘don’t look a gifthorse in the mouth’ does spring to mind.

Today there is no major data due in the UK, so attention will be elsewhere, with Eurozone inflation out at 10am, and US GDP at 1.30. The Federal Reserve also announce their interest rate and asset purchase decisions this evening, which could provide volatility for the USD.

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