The British Pound rallied further against the US Dollar on the back of today’s release of strong UK GDP figures. The positive data went some way to allay fears that the impending Brexit is damaging the UK economy. The surprising data helped push the British Pound to a 6-week high against its US counterpart. The British Pound also hit a three-week high against the euro; the strongest level since January 3rd. Meanwhile, the FTSE 100 also registered gains in the early European trading session, up 0.21% at time of writing.
Surprise UK GDP Growth
In a report released by the Office for National Statistics today, the U.K.’s gross domestic product is reported to have expanded by a seasonally adjusted 0.6% in the final quarter of 2016. The figures surprised analysts who had forecast growth of 0.5% in the 3-month period. The U.K.’s economy expanded by the same amount in the preceding quarter. On a yearly basis, the U.K economy grew 2.2 percent, slightly higher than the expected 2.1 percent. Overall for 2016, GDP growth eased from 2.2 percent in 2015 to 2 percent, in line with market expectations.
The increase in growth in the British economy is largely driven by the service sector. The largest contributions came from the consumer-focused industries such as travel agency services and retail sales. The construction and production sectors saw only minor positive contributions to growth in the last quarter of the year.
However, despite the better-than-expected figures, analysts continued to warn that the outlook for the world’s fifth largest economy remained gloomy. Even though the UK economy is demonstrating some strong resilience in the face of global uncertainty, growth in 2017 looks set to slow further as rising inflation is expected to keep household spending in check. The UK economy continues to defy critics following the surprise referendum result in June to exit the European Union. Since then, the British Pound has fallen by approximately 20% against the Euro and the US Dollar. However, the recent strong data releases, including today’s UK GDP figures, have seen the GBP claw back some losses