Home Daily Commentaries Pound unmoved as UK avoids recession

Pound unmoved as UK avoids recession

Daily Currency Update

Growth data for the fourth quarter of 2022 was released earlier this morning showing a flat reading for the October to December period. A technical recession in the UK is termed as two consecutive quarters of negative growth and following the -0.3% reading for Q3. The UK has avoided this by the narrowest of margins. There is still a chance that this could be revised lower in coming months and the outlook for the first quarter 2023 isn't looking great given the amount of strikes there have been however given the dire warnings we heard from many, including Bank of England Governor Andrew Bailey it appears the dip in output this year will be shallower than previously thought. The monthly reading for December came in worse than expected showing a fall of -0.5% instead of an expected -0.3%. A lot of Decembers drop was put down to rail strikes and a lack of people travelling to Premier League football due to the winter World Cup in Qatar however these matches need to be made up between now and the end of May. The pound has taken all of this in its stride and remains relatively unmoved with GBP/USD just above 1.21. Looking ahead it’s a quiet day on the domestic front with Tuesday's employment numbers and Wednesday’s inflation data the next big events to look out for. GBP/EUR is just under 1.13.

Key Movers

There was no top tier data of note from the States yesterday with the main talking point remaining the chorus from Fed members saying that rates still need to rise to contain inflation. Weekly Unemployment claims came out a touch worse than expected at 196k v 191k however this small miss was shrugged off by the markets. Today we have Prelim University of Michigan Consumer Sentiment data as well as Fed members Christopher Waller and Patrick Harker giving speeches. From the eurozone it was another quiet day on the macro front with news instead being dominated by Ukraine President Volodymyr Zelensky addressing the European Parliament in Brussels where he appealed for more weapons to fight the Russians. In news further afield Japanese Prime Minister Fumio Kishida is set to name Kazue Ueda as the next head of the Bank of Japan. The yen immediately strengthened on the news with USD/JPY dropping from around 132 to 130 which shows markets think the decades policy of super-loose monetary policy is another step closer to being ended. EUR/USD has traded the entire week between 1.0670 and 1.08 and we are in the midst of that range around 1.0740 at the moment.

Expected Ranges

  • GBP/USD: 1.2060 - 1.2200 ▲
  • GBP/EUR: 1.1220 - 1.1325 ▲
  • GBP/AUD: 1.7360 - 1.7500 ▲
  • EUR/USD: 1.0670 - 1.0800 ▼