Pound US dollar (GBP/USD) remains flat following UK GDP

Pound US dollar (GBP/USD) rangebound in the aftermath of UK GDP

(Updated 15:30, 10/05/24) The pound US dollar (GBP/USD) exchange rate has continued to trade sideways moving into this afternoon’s European session.

Despite some better-than-expected UK GDP figures this morning, where the data confirmed the UK had escaped its shallow recession in the latter half of 2023, the pound (GBP) has struggled to garner investor attention.

Following a notably dovish voting split at the Bank of England’s (BoE) latest interest rate decision on Thursday, the pound has continued on the defensive through to the end of the week as investors seemingly shrug off the UK’s rebounding GDP.

Turning to the US dollar (USD), an unexpected decline in this month’s Michigan consumer sentiment index has had little impact on the ‘greenback’ this afternoon, as the American currency holds steady against the majority of its rivals.

At the time of writing, GBP/USD is trading at around $1.2526, virtually unchanged from today’s opening levels.

Original article continues below:

Pound US dollar (GBP/USD) exchange rate subdued despite upbeat UK GDP

The pound US dollar (GBP/USD) exchange rate is trapped in a narrow range this morning following the release of the UK’s latest GDP reading.

At the time of writing the GBP/USD exchange rate is trading at $1.2531, virtually unchanged from this morning’s opening rate.

Pound (GBP) flat despite better-than-expected GDP

The pound (GBP) is trading sideways against the majority of its peers this morning following the UK’s preliminary GDP data for the first quarter of the year.

The quarter-on-quarter figure showed the UK economy expanded by 0.6%, rising from a 0.3% contraction in 2023’s fourth quarter, and surpassed a more modest estimate of a 0.4% reading.

Turning to the monthly figure, UK GDP expanded by 0.4% in the month of March rather than a prediction of 0.1%.

Despite the forecast beating data and confirmation that the UK has escaped its shallow recession at the end of last year, the pound has struggled to catch bids in the aftermath of the release as some economists have described the latest reading as a ‘hollow victory’.

Suren Thiru, Economics Director of ICAEW said:

‘These figures confirm an easy exit from the shallowest of recessions for the UK, as lower inflation helped return the economy to growth in the first quarter. The UK’s escape from recession is a rather hollow victory because the big picture remains one of an economy struggling with stagnation, as poor productivity and high economic inactivity limits our growth potential.’

Elsewhere, a somewhat mixed market mood as well as yesterday’s dovish Bank of England (BoE) interest rate decision is serving to undermine Sterling sentiment today.

US dollar (USD) rangebound ahead of consumer sentiment

The US dollar (USD) is treading water against the majority of its peers this morning and continues to lick its wounds following some disappointing US labour data yesterday afternoon.

USD investors now looking ahead to the University of Michigan’s consumer sentiment index later this afternoon.

As the data is forecast to tick up in May, this could see USD exchange rates firm in the second half of today’s European session.

GBP/USD exchange rate forecast: UK jobs data to drive movement?

Looking ahead, the primary catalyst of movement for the pound US dollar exchange rate early next week will likely be the UK’s latest labour data.

Tuesday’s data is expected to show unemployment in the UK held at a six-month high of 4.2% in March.

UK average earnings (excluding bonuses) are also expected to cool over the same period. Will signs of a slowing UK labour market stoke BoE rate cut bets and pull the pound lower?

Turning to the US dollar, on Tuesday the US will release its PPI data for April which is expected to remain at 0.2%. Any deviation from the forecasted figure could see USD exchange rates dip at the start of next week.

Sarah Ebrahem

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