GBP to USD: UK Pound rises after data shows surprise growth in economy

UK Pound (GBP) jumped on Thursday after data showed the British economy unexpectedly grew in the final quarter of last year, offering a brief respite from an otherwise downbeat economic outlook.

The UK Pound rose to $1.25155 against the US Dollar (USD) after the data, its highest in over a week. It was last up 0.42% at $1.24975.

Britain’s economy grew by 0.1% in the fourth quarter, figures from the Office for National Statistics showed.

Economists polled by Reuters had forecast that British gross domestic product would shrink by 0.1% in the period.
Despite the beat, analysts said the data still showed a lacklustre story about the British economy.

James Smith, economist at ING, noted that the GDP growth was due to a surge in inventories.

“These are a notoriously volatile accounting fixture which, unlike other parts of the GDP breakdown, don’t tell us much about the underlying health of the economy,” Smith said.

“The areas that do – household consumption, exports, and business investment – were all flat, or negative.”

UK Pound, last year’s best performing G10 currency against the dollar, has fallen about 0.1% since the start of the year, while markets have moved to price in more easing from the Bank of England this year as the economy slows.

“Risks are still firmly tilted to the downside in the UK,” said Michael Brown, senior research strategist at Pepperstone.

Dollar: USD Dominance in Global Trade Explained

Markets price in 54 basis points of further central bank easing this year from the BoE.
The pound was largely flat against the euro , with one euro at 83.39 pence.