The UK in Focus Amid Pound Sterling Boost by GDP, Dollar’s Selloff Remains Moderate


Sterling was one of the strongest after data showed better-than-expected GDP growth in December and Q4. UK GDP grew 1.2% mom in December, higher than expected 1.0% mom growth. Services index rose 1.7% mom. The manufacturing index rose 0.2% mom Production increased by 0.3% mom, construction fell by 2.9% mom, agriculture grew by 0.3% mom.

In the fourth quarter, GDP grew 1.0% QoQ, well above expectations of 0.5% QoQ. The service index rose 0.6% QoQ. The production index rose 1.8% QoQ. Production grew 3.3% QoQ. Construction grew by 4.6% QoQ. Agriculture grew by 0.7% QoQ.

Bank of England chief economist Andy Haldane said the “rapid roll-out of the vaccination program” means “a decisive turn for the economy, too.” The UK economy grew 1% QoQ in the last quarter of 2020, compared to a huge 16% growth in the third quarter and + 0.5% expectations. On an annualized basis, the Kingdom’s GDP in the fourth quarter was -7.8%, compared with a forecast of -8.1% and -8.6% last year.

The cable has withstood a rebound from daily lows while maintaining a range of around 1.3800 after upbeat gains in the UK. The GBP/USD spot is still growing 0.24% on the day.
The Dollar’s Selloff Remains Moderate
The dollar’s decline slowed during a very calm session as the dollar remains the worst performer this week, followed by the kiwi and loonie. The Swiss franc is the strongest, followed by the Australian dollar and the euro.

While a lot of data is not expected to significantly change the current picture of the economy, a big surprise from the retail sales report could revive the markets. In January, stimulus checks for $600, approved in the December virus bill, began circulating, so there could be a big hit that could give the slipping dollar much-needed support.

The dollar has plummeted from its two-month peak over the past week, and the dovish comments of Fed Chairman Jerome Powell also did not benefit the currency. However, some at the Fed maybe a little more worried than Powell about keeping stimulus taps open without a strategy to get out of an unlimited supply of liquidity.

On the other hand, the US dollar cut some of its daily gains amid a moderate recovery in US stock futures. This was seen as another factor contributing to the intraday rebound of about 35 pips. However, the sudden rise in US Treasury yields continued to support the dollar and held back GBP/USD further gains, at least for now.

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Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.