The Pound in demand
It seems the market is finally waking up to the UK growth forecasts as Sterling is having a fine week so far. Various investment banks have noted a fair increase in the demand of £ recently amongst both investors and businesses. With the third phase of the roadmap taking place next week, we should see the Pound finish this quarter strongly.
UK GDP for March shows the fastest rate of growth for 8-months with the boost mainly coming from schools re-opening. There is no doubt 2021 will be a record year for GDP (after a record-breaking contraction in 2020) and next month we will start to see how big. The forecasts start from around 5.7% to the BoE's recently improved 7.3%, with next year being equally as impressive at 5.5%-5.8%. This is far better than the recently announced EU figure which stands at around 4.3% for 2021 & 4.4% for 2022.
Exports to the EU appear to have recovered after an 8.6% MoM increase, easing initial fears of impact to trade post-Brexit. The ONS report shows January's disruption to trade is a thing of the past and the UK's trade position with the rest of the world is improving.
In the FX market, a country's ability to export more than it imports will support that particular countries currency (due to less reliance on investor capital), so it's important the UK keeps the trade deficit as low as possible. The UK recorded a smaller than expected deficit in March (-£11.71BN vs -£14.4BN) and the data also shows that for the first time since records began, the UK imported more goods from non-EU countries than from the EU.