UK GDP figures released this morning showed that the economy contracted 0.3% which was slightly worse than the 0.2% expected. The growth figure for the first half of 2022 was also revised down mainly down to weak data in the manufacturing sector.
GBPUSD has fallen back over the past week after peaking around 1.2440 and now stands around 1.2080. The fallback is down to analysts believing that the UK will perform the worst out of the G7 in 2023, and also that interest rates will not go as high as initially expected as the most recent BOE decision showed that two of the 9 policy makers voted for no hike.
The Pounds weakness was also down to the UK government borrowing printed far beyond forecasts. The figure was forecast to print at -£13 billion, and printed at £-22 billion, widening the Government’s borrowing deficit substantially. However, the borrowing was broadly due to the programmes enacted to assist businesses and households during the cost-of-living crisis, with a specific focus on preventing energy bills from spiralling further.
The Centre for European Reform (CER) believe that brexit has cost the UK £33bn in trade and investment, and the economy would be performing around 5.5% higher if the UK was still in the EU. Businesses are still trying to get to grips with the redtape which surrounds trading with the EU
The Euro found strength after a third straight month of improving business confidence in Germany. The Ifo Business Climate Index improved better than expected as pessimism continued to retreat in Europe’s largest economy. Also ECB policymaker Gediminas Simkus gave credence towards a 50bp rate hike in February which further boosted the Euro.
Confidence in the US economy grew in December as it rose from 101.4 in November to 108.3 as inflation numbers continue to ease. Depsite this the majority of analysts still believe the US will head into recession in 2023.
GBPUSD resides at 1.2060
GBPEUR resides at 1.1360
EURUSD resides at 1.0614