UK GDP Not as good as expected (Tom Holian)

Will Sterling Weakness Continue to Help the AUD to GBP Rate Improve?
Tom Holian

The Office for National Statistics has this morning released the UK GDP figures for both year on year and quarter on quarter. UK growth has been the strongest since 2007 at 1.9% for the year but the quarter was down on the previous period to 0.8% from 0.9%. The yearly figures are the best we’ve seen since 2007 but this has not come as too much of a surprise. However, the monthly figures are mildly disappointing which has led to Sterling weakening against the Australian Dollar during this morning’s trading session.

I personally think this is a short term move for GBPAUD exchange rates which hit their highest level in years only last week. The Office for Budget Responsibility has revised its 2013 growth forecast for the UK from 0.6% to 1.4% which is encouraging for both the UK and therefore Sterling in the long term.

Stronger UK GDP could ultimately lead to higher interest rates in the future  which again puts pressure on the Bank of England to raise interest rates sooner than first expected. UK unemployment came out at 7.1% last week the best level in 6 years but since the fall the Bank of England has said it will not use jobs figures in order to change interest rates even though this has been mentioned a number of times during the last few months.

During the Australian trading session it was announced that Business Conditions down under are near their best level in 3 years. This means that the RBA could be less determined to cut interest rates in the short term. The surprise data was more than likely due to the current low interest rates and the low Aussie Dollar which has helped to stabilize the Australian economy a little.

The next meeting for the Reserve Bank of Australia will be February 4th so if you’re worried about what may happen to exchange rates then get in touch.

If you want to save money compared to using your bank then contact me directly Tom Holian teh@currencies.co.uk