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‘Mucky’ UK GDP Leaves Pound US Dollar (GBP/USD) Exchange Rate Flat

US Dollar Currency Forecast

Pound Sterling US Dollar (GBP/USD) Exchange Rate Muted after UK GDP Stagnates

The Pound Sterling US Dollar (GBP/USD) exchange rate remained flat after UK GDP data, leaving the pairing trading at around $1.2919.

This morning’s data revealed that the British economy stagnated in the final quarter of 2019 when the country remained stuck in deadlock over Brexit.  

Figures from the Office for National Statistics (ONS) showed there was not any growth between the third and fourth quarter.

Sterling received a slight upswing of support as annual growth posted at 1.1%, despite downbeat expectations. Although, this remained the weakest annual growth since mid-2012.

The data also showed the economy only grew by 1.4% in 2019, up slightly from 1.3% growth in 2018.

Commenting on the weak growth, Resolution Foundation Economist, Jack Leslie noted:

‘The UK economy ended the 2010s on a low, with the joint weakest annual economic growth of the decade. This slowdown is widespread too – manufacturing is in recession and the services sector grew at its slowest rate since mid-2016.’

However, since Prime Minister Boris Johnson’s victory last year, optimism rose as the short-term Brexit uncertainty was lifted.

Jeremy Thomson-Cook, chief economist at payments provider Equals Group stated:

‘This is a mucky figure with the true sense of the UK economy’s performance occluded by the election of December 12.

‘More forward-looking data […] are more optimistic, and while outright optimism would be misplaced, upgrades to previous quarters are well received.’

US Dollar (USD) Flat as Risk Appetite Jumps

The Dollar remained flat against Sterling on Tuesday ahead of Federal Reserve Chair Jerome Powell’s twice-a-year update to Congress.

Despite the potential economic threat of the Wuhan coronavirus, markets expect Powell to remain relatively upbeat this afternoon.

Commenting on this, Cornerstone Macro economist, Robert Perli noted:

‘His message will probably be that, if rate cuts are coming, they would come solely in response to global disruptions associated with the virus. He will likely say clearly that the U.S. economy is inherently healthy.’

Meanwhile, the ‘Greenback’ likely remained flat as risk appetite continued to rise as markets believed the spread of the virus was beginning to slow.

While the number of deaths increased by 108 to 1,016, traders looked to more risk-sensitive currencies causing demand for safe haven to fall.

Pound US Dollar Outlook: Will an Upbeat Fed Powell Buoy USD?

Looking ahead to Wednesday, the US Dollar (USD) could rise against the Pound (GBP) following the release of inflation data.

If January’s inflation rises as expected, the ‘Greenback’ will receive an upswing of support.

Meanwhile, Federal Reserve Chair Jerome Powell is also expected to testify before Congress for a second day.

If Powell remains upbeat about the economic outlook, the Pound US Dollar (GBP/USD) exchange rate will slide.