The Pound has hit a three week high after the UK’s biggest business lobby has increased its economic expectations for 2012 and 2013 after the nation’s economy posted better-than-expected growth for the third quarter.
Sterling has been bolstered by a number of stronger-than-expected data reports. Mortgage lender Nationwide showed that house prices rose faster than forecast in October and the latest GDP figures showed that the UK posted growth of 2% for the third quarter.
According to the Confederation of British Industry, the economy will stagnate this year before expanding by 1.4% in 2013 and 2% in 2014. They say that the good GDP figure was partly due to one-time factors such as the Olympic Games and Queens Jubilee but also warned that the UK’s economy is still highly vulnerable from external shocks from the Eurozone and United States.
John Cridland CBI director General said; “The economic outlook is challenging, risks are on the downside. It’s more likely than not that European policy makers will continue to do enough to keep the Eurozone together, but there has to be a risk that slows down global growth.”
Anna Leach, the CBI’s head of economic analysis, said the U.S. fiscal cliff will add to the uncertainty on the economic outlook through to the end of the year. The cliff refers to more than $600 billion of federal spending cuts and tax increases that will automatically take effect at the start of next year unless Congress acts. The impact on the US economy in the fourth quarter from Hurricane Sandy will be “relatively limited,” Leach said. The organisation believes that the fourth-quarter will be positive as households, trade and businesses make bigger contributions to growth.
The UK faces many tough challenges still with some big factories and shop chains being forced to close or enter administration. Too many closures could see the CBI’s predictions appear as though they are just wishful thinking.
The weaker than expected Manufacturing PMI for October did not affect the Pound too much as it was already priced into today’s trading.
As of 11:30 am
The Pound to Euro exchange rate is currently trading at 1.2480
The Pound to US Dollar exchange rate is currently trading at 1.6162
The Pound to Australian Dollar exchange rate is currently trading at 1.5571
The Euro to US Dollar exchange rate is currently trading at 1.2952
The Euro to Pound exchange rate is currently trading at 0.8013
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