Poor GDP figures hurt the Pound

The disappointing UK GDP figures yesterday caused the Pound to fall over 1% against the majority of currencies. It was expected to show an increase of 5.5% month on month, but fell well below that figure with a rise of just 1.8%. The industrial and production sectors showed promising figures, but it was the main sector services that dampened hopes with only a slight increase from April. 

The lack of a significant rebound highlights that even though shops have re-opened, the footfall has drastically reduced. Many people are still at home and/or have job worries and so aren't spending money. With the lockdown now pretty much over, hopefully it will encourage consumers to go out and spend money to help kick-start the economy. The cut in VAT for the hospitality sector, should mean some lower prices when eating out for a few months and August's Mon-Wed discount will certainly provide businesses a boost. 

Because of the poor GDP figures, analysts are now worried about the UK's inflation data tomorrow. If inflation falls, it will put pressure on the BoE to cut interest rates into negative territory, something that will hit the Pound hard. Inflation is an important indicator as to the health of an economy and right now, the UK isn't too healthy. So tomorrow could be bad for Sterling. 

The Pound has recovered some ground this morning though, as there is expected to be positive news incoming of the initial trials of the Oxford Covid-19 vaccine. Stocks have jumped up and so with it £.

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