British pound sterling: Hope as indications confirm Q2 GDP downturn aint as bad as first thought

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Published on Friday, 10 August 2012 13:14

Written by Will Peters

International Money Transfers at our sister site

The pound sterling (Currency:GBP) having a mixed day's trade. Essentially that boost that came from Mervyn King and his team at the Bank of England on Wednesday continues to support the UK currency as we head into the weekend.

The pound euro exchange rate is 0.04 pct up on the day at 1.2714. Watching paint dry is more exciting than watching this pair bounce around the 0%-change mark.

The pound dollar exchange rate is 0.26 pct down on yesterday at 1.5594.

The pound Australian dollar exchange rate is 0.27 pct up at 1.4827. The AUD has taken a bit of a beating today after it was shown Chinese trade data was rubbish.


Now to the good news: The Office of National Statistics has also revealed this morning that construction output fell a better-than-expected 3.9% in the second quarter.

This is far below the decline of 5.2% that was penciled into to the dire Q2 GDP figures issued by the ONS last month.

Because construction was such a drag on those GDP numbers, this points to the decline in overall economic output being a little less precipitous than first thought.

Added to upwardly revised industrial production numbers, this means the economy might have shrunk by 0.5%, not 0.7%, between April and June.

So this is an improvement, of sorts, but from a currency market persecutive we always have to ask 'What Would The Bank Do?"

If the Q3 numbers turn out to be decent then more analysts and currency players will lower expectations for more monetary policy easing at The Bank of England.

Once this view takes hold we will start seeing the sterling gaining in confidence.