GBP/USD Exchange Rate Slumps as UK GDP Misses
The Pound to US Dollar (GBP/USD) exchange rate is on the defensive today, in response to some weaker-than-expected GDP figures from the UK.
At the time of writing the GBP/USD exchange rate is trading at around $1.2515, down roughly 0.3% from today’s opening rate.
Poor GDP Figures Pose Problem for Pound’s (GBP) Long Term Recovery
Having rallied through the first half of July, the Pound (GBP) now faces some potential hurdles going forward with the publication of the UK’s latest monthly GDP release.
According to data published by the Office for National Statistics (ONS), the UK economy grew by 1.8% in May, up from a 20.3% contraction in May but missing expectations for a more robust 5.5% expansion.
The disappointing figures suggest that the UK economy is not bouncing back quite as quickly as economists had hoped, after the lockdown saw brought economic activity to a screeching halt in April.
Analysts warn an impending employment crisis could add to the UK’s economic woes as well.
Robert Alster, head of investment services at Close Brothers Asset Management, comments:
‘For the economy to only grow by 1.8 percent in May, the month where lockdown started to ease, points to choppy waters ahead.
‘While GDP has improved slightly, it’s worth noting that the economy is still 25% smaller than it was in February, before the pandemic took hold. Jobs, both on the high street and in industry, are disappearing at an alarming rate and there are no signs yet of any real improvement in the UK labour market.’
The OECD has already forecast that the UK is likely to be the hardest hit of any major economy from the fallout of the coronavirus crisis, with anything that supports this view point likely to weigh on the Pound going forward.
US Dollar (USD) Buoyed by Positive Inflation Figures
The US Dollar (USD), meanwhile, has found support this afternoon following the publication of the latest US consumer price index.
These revealed that headline inflation rose from 0.1% to 0.6% in June, with core inflation surprising by holding at 1.2%.
The uptick in inflation was attributed to higher fuel cost as well as an increase in food prices over the past 12 months.
The improvement in inflation is likely to be welcomed by the Federal Reserve and should help the bank avoid needing to take action for the time being.
Comments are closed.