As you were, GDP
A second tight trading day in a row saw the GBP gently lose ground against both the EUR and the USD again. As we open up this morning the Pound has lost the 1.5300 figure against the US Dollar and continues to head downwards and the same is true for levels against the Euro. The underlying trends we discussed during the week continue to play out, with the Greek agreement and focus on potential rate increases for the US still providing headwinds for the UK currency.
Yesterday’s data releases were patchy throughout the day. British GDP was confirmed as soft when the confirmed figures were announced yesterday. Some expectation existed in the markets that this quarter’s GDP could experience an upwards revision but this was not to be. Since 2012 the growth of the economy hasn’t been as slow, this has weighed on the strength of the Pound and contributed to it’s downward sloping trend. In the figure, some clues as to the segments that are performing (or not) were available. Production and construction were improved slightly in the revision but this was balanced out by a reduction in the services figure. Accompanying the news was the expected rhetoric suggesting this Q1 slowdown was an isolated event and that the UK’s economic recovery is on track.
David Cameron’s Eurozone visits continue and he is due to meet German Chancellor, Angela Merkel today. He is seeking to raise support for changing the terms under which Britain belongs to and trades with the Eurozone. This has been met so far with mixed commentary. French President, Francios Hollande, has called the proposed reforms ‘very risky’ but certainly there appears a considerable desire from Euro nations for the UK to remain in the currency bloc.
Leading in to the end of the week, we have Eurozone money supply which is forecast for an improvement. Italian Consumer Price Index will reveal the headline inflation figures and then shortly afterwards we will learn the Greek GDP figure – Greece incidentally is to pay their next instalment of repayments on the 5th June. Last, but certainly not least, the United States GDP figure is due this afternoon as well. Forecasts are for contraction but this figure will be critical in flavouring the interest rate conversation.