Sterling Rises Against Dollar as UK Economy Grows
Sterling rose to $1.25 after preliminary data showed the UK economy grew by 0.1% in the final quarter of 2024. The economic growth posted defied expectations of a 0.1% contraction and outperforming the Bank of England’s forecasts.
The economy is now slightly larger than before Labour took office in July, offering the government some relief. However, challenges persist, with the UK’s Office for Budget Responsibility set to release an updated economic and fiscal outlook on March 26th, amid reports that it has lowered its growth projections.
Last week, the Bank of England cut interest rates by 25bps to 4.5%, its third rate cut since beginning its easing cycle in August 2024, and downgraded its GDP growth forecast for 2025 to 0.7%.
UK economy was a bit better than feared in the fourth quarter but the outperformance was solely because of a massive increase in inventories, according to ING economist, James Smith.
Consumption was flat while business investment fell sharply despite some really good numbers earlier in the year. EUR/GBP dropped 20 pips on today’s data, but ING economist says a re-assessment of the data could see sterling hand back its gains.
We’re negative on sterling into the second quarter and suspect that EUR/GBP will find support this month in the 0.8300/8350 area. #Sterling Rises Against Dollar as UK Economy Grows Naira Rises as Gross External Reserves Hits 3-Year High
