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UK GDP beat expectations

Monday 12 December, 2022

Daily Currency Update

The UK economy grew in October, data showed earlier this morning. UK GDP rose 0.5% in the month in October, but it is believed this was boosted by an extra working day in the month after September’s bank holiday for Queen Elizabeth II’s funeral. Despite the uptick from the forecast of 0.4%, the Bank of England expects GDP to contract by 0.3% in the final quarter of the year. GBP/USD touched 1.2310 at the end of Friday but had since fallen back down to 1.2210. The data this morning has supported the GBP, which now trades at the upper end of this range – GBP/USD 1.2275. GBP/EUR has continued to trade within a narrow range after touching 1.1670 late Friday. The currency pair currently sits at 1.1630. A gloomy prognosis was given by both the UK Chancellor Jeremy Hunt and the Bank of England last week, confirming the UK was in a recession and one that could be the longest since records began. Despite this, the Bank of England is expected to join the US Federal Reserve and European Central Bank in raising borrowing costs this week. A 50-basis points increase is expected on Thursday.

Key Movers

US data on Friday showed higher-than-expected PPI figures. Core PPI was 0.4% month-on-month against the 0.2% expected, highlighting the risk that while inflation is starting to ease, it may not ease as quickly as markets expect. The news comes ahead of CPI for November, due for release on Tuesday which eyes will now turn to prior to Wednesday’s key announcement, FOMC update, and Federal fund rate. There was a notable slowing in core inflation last month and the consensus is that it continues this month at 0.3% m/m and 6.1% y/y. If this is the case, the planned 50-basis point hike expected from the Fed on Thursday may see no change. USD has lost ground against the EUR and the GBP this morning. EUR/USD currently sits at 1.0560 and GBP/USD opens at 1.2275.

Expected Ranges

  • GBP/USD: 1.2210 - 1.2330 ▲
  • GBP/EUR: 1.1580 - 1.1690 ▲
  • GBP/AUD: 1.8020 - 1.8180 ▲
  • EUR/USD: 1.0520 - 1.0590 ▲