Pound Rises As U.K. Exits Recession
10 May 2024 - 1:41PM
RTTF2
The British pound strengthened against other major currencies in
the pre-European session on Friday, after the U.K. economy exited a
technical recession in the first quarter with the economic output
growing better than expected led by a rebound in the services
output and household spending.
Data from the Office for National Statistics showed that the
U.K. gross domestic product grew 0.6 percent from the fourth
quarter, when the economy shrunk 0.3 percent. Output had declined
0.1 percent in the third quarter last year.
Economists had expected the first quarter growth to come in at
0.4 percent.
GDP rose 0.2 percent year-on-year in the first quarter, beating
expectations for stagnation.
The monthly GDP indicator grew 0.4 percent sequentially in March
after 0.2 percent gain in February, which was revised up from 0.1
percent. In January, GDP rose 0.3 percent. Economists had forecast
a 0.1 percent increase for March.
European stock markets traded higher, after data showing a much
bigger than expected increase in U.S. jobless claims for last week
added to recently renewed optimism that the U.S Fed will lower
interest rates by September and optimism over China's economic
recovery likely to underpin investor sentiment.
The dollar fell and bond yields dipped as fresh signs of an
easing U.S. labor market helped keep hopes of Fed interest rate
cuts alive.
There is also optimism around Chinese economic recovery after
April trade data beat estimates and two key cities of Hangzhou and
Xian scrapped all restrictions on home purchases to lure
buyers.
Traders also remain cautious ahead of a report on U.S. consumer
sentiment in the month of May, which includes readings on inflation
expectations.
Thursday, the pound weakened against other major currencies
after the Bank of England maintained its key policy rate for the
sixth consecutive meeting.
The Monetary Policy Committee decided to hold the Bank Rate at
5.25 percent again in a split vote. The current bank rate is the
highest since early 2008.
Meanwhile, the Bank of England (BoE) Governor Andrew Bailey
hinted at potential future rate cuts. The British sterling held
steady against its major rivals in the Asian trading today.
In the European trading now, the pound rose to an 8-day high of
195.17 against the yen, from yesterday's closing value of 194.63.
The next possible upside target for the pound is seen around the
200.00 region.
Against the Swiss franc and the U.S. dollar, the pound advanced
to 3-day highs of 1.1368 and 1.2542 from Thursday's closing quotes
of 1.1347 and 1.2525, respectively. If the pound extends its
uptrend, it is likely to find resistance around 1.15 against the
franc and 1.27 against the greenback.
The pound edged up to 0.8595 against the euro, from yesterday's
closing value of 0.8609. On the upside, 0.84 is seen as the next
resistance level for the pound.
Looking ahead, European Central Bank will publish account of its
latest monetary policy meeting at 7:30 am ET.
In the New York session, Canada jobs data for April, U.S.
University of Michigan's consumer sentiment for May, U.S. Baker
Hughes oil rig count data and U.S. Federal budget balance report
for April are slated for release.
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