UK GDP beats estimates

Hi everyone,

The UK continues to beat economic expectations in Q1 with 'positive' GDP figures released today. Obviously the figures themselves are very poor under normal circumstances, but these are not normal times of course. The economy shrank by 2.9% in January, much less than the 4.9% predicted. The year-on-year figure was also better (-9.2% v -10.9%) and so January shows economic activity performed relatively well amid lockdown measures. 

Today was the first official data release of the UK's trade performance since leaving the EU and it was more good news. The data shows the UK's trade deficit has been less severe than expected. The trade balance for January shows -£9.83BN compared to -£12.5BN anticipated. The trade balance figure has always been important to the £ because the UK imports more than it exports and this affects Sterling's valuation. So the smaller the deficit, the better for the Pound. 

Unfortunately, even though both of the above points are great, they have done little to help the £ today. Even the latest coronavirus reports out of Germany & Italy today haven't affected £-€. So the Pound v Euro may have plateaued for now and investors may be waiting on Q2 economic figures before pushing higher or once new vaccine milestones are hit.

Yesterday, £-$ rates touched 1.40 once again after President Biden signed his $1.9 trillion stimulus package bill into law. This is good news for the US as it will aid dramatically in the nations economic recovery. If the US is strong, it aids in investor appetite to the global market, meaning there is no need to leave money in the safe haven $. This will weaken the $ and push £-$ rates closer to the 1.50 mark.

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