The Pound gained over half a percent in value today after the Office for National Statistics revised its earlier growth figures for the UK economy in the first quarter of 2018. The surprise announcement by the ONS stated that the 0.1% economic growth rate in the UK between January and March was actually 0.2%.
.
ONS revises GDP growth in Q1 upwards to 0.2%. A nudge. But could be a harbinger of stronger Q2.
— Andrew Neil (@afneil) June 29, 2018
.
The data held by the ONS initially marked a decline in the construction sector at 2.7% but, following further investigation, the slowdown was a much smaller 0.8% reduction in output. Investors believe this improvement means an interest rate rise in August is likely and reacted accordingly, with their demand driving the value of the Pound Sterling up by 0.61% to $1.3153.
Sterling currently sits at a near seven-month low against the US Dollar, in part due to Brexit fears, but the Dollar is at risk of following China’s Yuan downwards as the US/China trade war continues to escalate, and weakness in the Dollar would push the Pound back up to perhaps the same strong levels we saw at the start of the year.
The stronger growth brings the UK closer to the 0.4% rate of the Eurozone but still shy of the expected 0.3% that the Bank of England had originally forecast. The BoE are also predicting a return to 0.4% growth by the end of June as good weather makes up for lost time earlier in the year during the heavy snowstorms.
The ONS has reduced its overall growth prediction for the UK in 2018 from 1.8% to 1.7%.
