The Pound Sterling (GBP) to Euro (EUR) exchange rate recovered from yesterday’s weakness to push back above the 1.26 level.
The rise came after the release of the UK latest preliminary GDP growth rate data matched economist forecasts and showed that the UK economy has finally emerged from the effects of the Great Recession.
The report released by the Office for National Statistics confirmed that UK output has finally risen above pre-crisis levels and will be a boon to the ruling Conservative led government ahead of next year’s elections.
The preliminary GDP data showed that the UK’s gross domestic product rose by 0.8% in the second quarter, matching economist forecasts.
The figure means that the nation’s economy has now fully recovered the output lost during the financial crisis.
On a year on year basis GDP increased by 3.1%, an improvement on the previous figure of 3.0% and marks the fastest annual pace of growth since 2007.
According to the data, growth was led by the dominant service sector which expanded by 1%, the largest gain seen since the third quarter of 2012. Industrial production rose by 0.4% and manufacturing increased by 0.2%. Construction meanwhile dipped by 0.5% as output fell in May.
GBP/EUR Exchange Rate Forecast to Rise Further
Next week will see little in the way of UK economic data releases but Friday’s GDP data is likely to keep the currency supported for much of the week.
A number of Eurozone reports are due but those are likely to do little to knock the GBP/EUR rate.
The increased expectations for the Bank of England (BoE) to raise interest rates by the end of the year and the diverging of the European Central Bank’s policies from other major Central Banks is likely to support Sterling and continue to weigh upon the single currency.
‘There’s clear momentum behind the economy and there’s nothing obvious out there that suggests a sudden slowdown in the next few months. The bank’s going to have edge down its estimate of spare capacity in the economy and that may be one of the factors that supports the case for dissent amongst the BoE’s policy makers,’ said an economist at Commerzbank AG.
Against the US Dollar the Pound was hovering around the 1.70 levl as the US currency continued to receive support from Thursday’s upbeat jobless claims data. The positive data fuelled speculation over the timing of a possible interest rate hike by the Federal Reserve.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6974 ,
Pound Sterling,,Euro,1.2616 ,
Pound Sterling,,Australian Dollar,1.8034 ,
Pound Sterling,,New Zealand Dollar,1.9838 ,
US Dollar,,Pound Sterling,0.5891 ,
Euro,, Pound Sterling ,0.7923 ,
Australian Dollar,, Pound Sterling ,0.5542 ,
New Zealand Dollar,,Pound Sterling,0.5045 ,
[/table]
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