The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in a tight range on Thursday as UK GDP and Eurozone data releases offered little in the way of surprises.
The GBP/EUR exchange rate hit a session high of 1.368
According to data released by the Office for National Statistics (ONS) the UK economy expanded at a pace of 0.5% on a quarter on quarter basis in the final three months of last year. The figure was in line with economist forecasts and was a slight dip from the previous quarter’s growth rate of 0.7%. On an annual basis, the UK economy expanded by 2.7% in the fourth quarter of 2014, unchanged from an earlier reading. At an annualised rate, the economy grew by 2.6% in the third quarter.
The report also showed that business investment fell by 1.4% in the final quarter of 2014, adding to the 1.25 decline seen in the preceding quarter. The quarterly decline is the biggest seen since 2009 and disappointed economist forecasts for a rise of 1.9%. The drop in investment was blamed on the recent steep drop in oil prices.
Even as the data confirms that the UK economy cooled at the tail end of last year, economists are expecting the nation to experience a strong start to 2015. Compared to other Group of Seven nations the UK saw the strongest growth.
Political Uncertainty Worrying Investors
With the outcome of the upcoming general election uncertain, economists are predicting that investment into the UK will likely fall further. The political uncertain is also likely to weaken the Pound.
‘Potential political uncertainty poses a significant downside risk to growth in 2015. If there is sustained political uncertainty after the May general election, then the UK could well suffer at least a temporary loss of economic traction,’ said Howard Archer, an economist at IHS Global Insight.
Further losses for the Euro were restrained as employment data released in Germany showed that unemployment dropped twice as much as forecast in February. According to the Federal Labour Agency, the number of Germans out of work fell by 20,000 to 2.81 million on a seasonally adjusted level.
Also lending support to the single currency was a report, which showed that confidence in the Eurozone economy improved for a second consecutive month in February on hopes that the European Central Bank’s €1.1 trillion quantitative easing programme will aid the economy.
Market attention will now turn to Friday’s German and Italian Inflation data.
