FD: Pound makes ground after release of GDP figures
Sterling recovered today following three days of decline after the release of figures that confirmed the UK had avoided a double-dip recession, advancing against the dollar to $1.65425/£1 in afternoon trading and extending its monthly gain to 3.3 per cent.
The pound also strengthened by 0.4 per cent to 88.66 pence per euro after earlier depreciating to 89.23 pence, the weakest level since April 13.
GDP growth estimates, published by the Office for National Statistics (ONS) this morning (27 April), showed a gain of 0.5 per cent for the three months to March 2011.
This was below Budget forecasts of 0.8 per cent growth, but critically meant that the UK had not recorded the two quarterly declines needed to officially push it back into recession following the 0.5 per cent decline in the final quarter of 2010.
Tiffany Burk, senior market analyst at Travelex Global Business Payments, said sterling had made "strong gains" on the back of the GDP data.
"The breakdown showed strong growth in the manufacturing sector, which was helped by exports and services. Dragging on the growth figure was a big dip in construction.
"While the data shows the economy moved further away from the possibility of slipping into recession, growth is not strong enough to warrant a rate increase at next week’s central bank policy meeting.
"Policymakers will likely want to see strong growth figures in the second quarter before becoming confident enough to support a tighter monetary policy."
Tom Higham, sales director at Currencies.co.uk, said positive GDP figures were always good to see, but that it was important to remember that there has been no growth overall over the past six months and that the pound was still vulnerable in the medium term.
"For the currency markets we have not seen a big sterling reaction to the figures. There has been a marginal increase against the euro and against the green back.
"However, if you had not seen this growth there is a chance we could have been looking at the UK falling into recession. My opinion is that in the medium term this does nothing to help the pound."
