Pound gains as UK economy grows in Q4

January 29
10:31 PM 2016

The British Pound has gained strength against major global currencies after a report stated that UK's economy growth speeded up during the fourth quarter of 2015. The increasing consumer demand added to the economy expansion. The British Pound recovered from the two-week low of 1.4338 against the US dollar. 

Meeting forecasts made by analysts, the UK's gross domestic product (GDP) rose 0.5 percent for the fourth quarter of 2015 from 0.4 percent in the previous quarter. The economy growth indicates the strength of consumer demand and key services sector in Britain. The UK economy growth is a major fillip for the country in the wake of uncertainty in the global economy. 

Investors consider the marginal growth in the economy is a major positive factor amid slowdown in the emerging markets. The ongoing fiscal concerns about eurozone are also impacting the UK economy. Eurozone is the major trading partner for the Britain. The British Pound strengthened against the US dollar from the two-week low of 1.4338 to peak of 1.4324. Now the pound is trading at 1.4314, as reported by ICN.

The Office of National Statistics (ONS) released data on GDP growth for the fourth quarter of 2015. The overall GDP growth rate for 2015 was 2.2 percent lower than 2.9 percent in 2014. The services sector accounts for 78.4 percent of the total GDP. It grew 0.7 percent during the fourth quarter. 

The construction segment contributes 6.4 percent to the GDP and it eased 0.1 percent, which is better than expected. Industrial production contributes 14.6 percent to the GDP and it dropped by 0.2 percent. The sluggish mining and quarrying impacted the industrial production, according to FX Street

It's forecast the UK's GDP may grow at 0.5 percent or higher in the current quarter. The manufacturing cycle to turn and this will ease the pressure on the industrial production. However, the uncertainty continues to be a cause of concern for the economy. 

British Sterling Pound recovered from 5-1/2 -year low after the UK's latest data. The ultra-low inflation rose to its highest in almost year. The consumer prices were edged up 0.1 percent taking the annual rate of inflation to 0.2 percent, according to the data from ONS. The British Pound was up at $1.4340 after the data from the level of $1.4320 before the report, according to Reuters.

The subdued wage inflation and financial crisis are forcing Bank of England (BoE) to be patient. The next meeting of BoE is scheduled for second week of February. BoE is likely to get another dovish stand. The new report on inflation will also provide key details about global economy. 

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