USD to GBP Fluctuates Despite Dollar Weakness Today
Yesterday the UK inflation missed expectations, keeping the USD to GBP rate fluctuating, which is showing weakness after being one of the strongest currencies in January. Today the GDP report showed another soft reading, keeping the GBP the weakest currency once again.
with the monthly numbers indicating a -0.1% contraction in December, while the Q4 GDP showed an even bigger contraction. This would mark a return to contraction after the growth recorded in November. If this contraction aligns with market expectations, the UK economy would technically enter a “recession,” defined as two consecutive quarters of negative GDP growth.
Additionally, Bank of England (BoE) officials indicated that approximately two-thirds of the impact of higher interest rates on GDP levels had already been realized. This suggests that the effects of previous interest rate hikes on economic activity may have already been absorbed by the economy.
UK December monthly GDP and preliminary Q4 GDP figures:
- December monthly GDP: -0.1% (vs. -0.2% m/m expected)
- November monthly GDP: +0.3% (revised from +0.2%)
- Year-on-year GDP: 0.0% (vs. +0.3% y/y expected)
- Previous year-on-year GDP: +0.2%
- Preliminary Q4 GDP: -0.3% (vs. -0.1% q/q expected)
- Previous Q4 GDP: -0.1%
- Year-on-year Q4 GDP: -0.2% (vs. +0.1% y/y expected)
- Previous year-on-year Q4 GDP: +0.3%
Indeed, the weaker-than-expected GDP figures for December and the fourth quarter as a whole confirm a technical recession in the UK during the latter part of last year. This unexpected contraction raises concerns about the previously perceived economic strength at the end of Q4 and may intensify pressure on the Bank of England (BOE) to consider lowering interest rates sooner. If this economic pattern persists into the current year, it could further influence monetary policy decisions by the BOE.
GBP/USD Live Chart
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