UK economy lags behind peers

Hi everyone,


We learnt yesterday that the UK has fallen behind the G7 countries in terms of GDP. The data shows the economy grew just 1.3% in Q3, softer than the 1.5% forecast. Septembers figure of 0.6% saved what was a poor summer for the UK. It leaves the economy 2.1% below pre-pandemic levels with a tough Q4 ahead.


It's clear the best of the recovery is now behind us in the UK after a fast start in Q1/2. This matters to the Pound because interest rates won't be hiked unless the economy is performing well. And, as many of you have seen, raising interest rates are the key to unlocking a currencies performance (October). With the current shortages, high inflation and higher taxes to come, household pockets will be hit, making a case to limit rate hikes and/or kick the can down the road.


£-€ has been flat this week as expected, even though yesterdays data was largely negative. Unless a drastic headwind comes to the market we should see 1.16-1.17 mid-market the trading range. There has only been a swing of 0.5% this week, which says a lot about both currencies to be honest. £-$ hit an unfortunate 2021 low yesterday and has seen a 2% swing this week with volatility likely to continue. Worryingly high inflation in the US is putting pressure on the Fed to raise interest rates which is aiding the $.


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