UK GDP data misses expectation
Thursday 12 May, 2022
Daily Currency UpdateThe pound experienced some downward pressure this morning as UK GDP figures were released and showed that quarterly growth fell short of estimates. From January to March growth was expected at 1% and came in at 0.8%, Year over Year release at 6.4% when 9% was expected and growth actually went into reverse in March with the monthly figure at -0.1% fall. Things are currently not looking too good for the pound and the National Institute of Economic and Social Research has suggested that we could see negative growth in Q2 and Q3 which would constitute a technical recession before a recovery in Q4.
The Bank of England Deputy Governor Dave Ramsden has warned this morning that UK’s “worst inflation crisis in decades will take longer to ease fully” - this combined with the US CPI reading yesterday has contributed to GBP weakness against the USD.
The main event of the week was yesterday's CPI data release which showed a slight drop in the overall reading from 8.5% to 8.3% but not as far as the 8.1% fall as expected. The US dollar reacted positively off the back of this and saw moderate gains against GBP. The underlying core reading which does not include food and energy costs still fell but also came out higher than estimates at 6.2% y/y. This was one of the main reasons there was a big sell-off in stock markets after the reading and the dollar gained across the board. Although it seems we have reached the peak of CPI data this report highlighted that it's not just high oil and food costs that are causing the upward pressure and still means the Federal Reserve could increase interest rates by 0.75% at one of its next two meetings.
Key MoversIt was light from the Eurozone yesterday but we did have Christine Lagarde speak and she has opened the door for a July rate hike to control inflation that is currently at 7.5% . The markets are now catching up from yesterdays CPI release in the US, and the EUR has declined this morning against GBP and USD.
Later today we have PPI Data from the US at lunchtime which is expected to show a monthly increase of 0.5%, a big drop from the previous monthly 1.4% rise.
- GBP/USD: 1.2155 - 1.2225 ▼
- GBP/EUR: 1.1635 - 1.1735 ▲
- GBP/AUD: 1.7605 - 1.7785 ▲
- EUR/USD: 1.0405 - 1.0485 ▼