Pound Sterling Today: GDP Growth Data Beats Expectations, But Still Under Pressure Against Euro and Dollar

PoundSterlingLIVE

Published Nov 10, 2023 07:38

Pound Sterling Today: GDP Growth Data Beats Expectations, But Still Under Pressure Against Euro and Dollar

PoundSterlingLIVE - A string of UK economic growth figures have beaten expectations, but the British Pound has found little comfort and is likely to remain under pressure over the coming days as markets relentlessly raise expectations for Bank of England interest rate hikes in 2024.

UK GDP for the third quarter was flat at 0% quarter-on-quarter, which was better than the -0.1% expected, helping growth rise 0.6% year-on-year in the third quarter, which is above the 0.5% figure the market was expecting.

September saw growth surprise at 0.2% month-on-month, said the ONS, better than the expected flat outturn.

A surprise rebound in construction stands out, with a 0.4% rise m/m in September, surpassing expectations for -0.5% and August's result of -0.8%. Services output - which accounts for the economy's largest sector - grew by 0.2% in September 2023 following growth of 0.3% in August 2023.

Manufacturing output recovered to 0.1% m/m in September from -0.7% in August, which nevertheless disappointed against expectations for an outcome of 0.3%.

Following the data, the Pound to Euro exchange rate was quoted at 1.1462, having recorded its lowest daily close since May on Thursday, confirming little appetite in the market for Pound Sterling.

The Pound to Dollar exchange rate remains under pressure at 1.2219.

"It's clear that higher interest rates are starting to bite, and demand has become less resilient. CBI surveys agree with that overall picture and suggest that private sector activity is likely to stagnate in the coming months," says Ben Jones, Lead Economist at the CBI.

The Pound has come under pressure since August as markets slash expectations for UK interest rates, reducing the odds of a further hike from the current 5.2% and rapidly raising bets for rate cuts in 2024.

The Pound's decline in the wake of these better-than-expected GDP numbers suggests the market wants to see significant upside surprises in the data before it bids on the Pound.

The GDP figures underpin the Bank of England’s latest forecasts that show the economy is due to flatline over the coming quarters.

The CBI says the government must take action in this month's Autumn Statement. "Unlocking business investment across the economy by making full expensing permanent could – according to CBI analysis - lead to a 2% increase to GDP by the end of the decade," says Jones.

An original version of this article can be viewed at Pound Sterling Live