The British economy expanded less than expected in the third quarter and the nation’s budget deficit widened unexpectedly in November casting doubt over the country’s economic recovery. As a result the Pound has weakened against the US Dollar due to investors seeking a safe haven from the disappointing data.
GDP only rose by 0.9% down from the previous estimation that it had grown by a full 1%. According to the Office for National Statistics the government’s budget deficit excluding the support given to the banks rose to £17.5 billion compared with £16.3 billion at the same time last year.
“We’re expecting a fairly sluggish fourth quarter and the public deficit does not seem to be coming down as rapidly,” said Peter Dixon, an economist in London. “The future will be one of modest fiscal retrenchment.
As a result of the disappointing news the Office for Budget responsibility cut its growth forecasts for December and said that Chancellor George Osborne will miss his target of cutting the government’s debt burden by 2015. Fears are growing that Britain could now lose its accredited AAA rating and that the country’s growth surge in the third-quarter was short-lived. The Bank of England is now warning that the economy will shrink again this quarter and is forecasting stagnation for the near term. The possibility of a triple-dip recession is very high.
The growth in the three months through September was the first for the U.K. since the third quarter of 2011. From a year earlier, GDP was unchanged, the statistics office said. The Pound could weaken further if the Bank of England provides any indication that it could be considering further monetary easing in the near future.
The Pound to Euro exchange rate is currently trading at 1.2298
The Pound to US Dollar exchange rate is currently trading at 1.6240
The Pound to Australian Dollar exchange rate is currently trading at 1.5556
The Euro to US Dollar exchange rate is currently trading at 1.3202
The Euro to Pound exchange rate is currently trading at 0.8129
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