UK narrowly avoids recession as December GDP shows flatline
According to the Office for National Statistics, the UK has narrowly avoided entering a recession at the end of 2022, after economic growth flatlined in the final quarter of 2022.
A decline in gross domestic product (GDP) of 0.5% in December was offset by increases in the two previous months leaving the economy performing at the same level as the previous quarter. The 0.5% decline has been linked to widespread industrial action at the back-end of last year, with many industries taking strike action.
Negative growth in the fourth quarter would have signalled recession after the UK economy shrank by 0.3% in the third quarter (a technical recession is generally defined as two consecutive quarters of negative growth).
Chancellor Jeremy Hunt said that recent figures underscored Britain’s resilience, adding that data showed the economy was the fastest growing in the G7 group of rich nations last year. The data underscores the difficult position facing the UK economy which is widely expected to contract in 2023 (expectations that continue to harm investor sentiment towards GBP).
Nevertheless, the pound has recovered over recent days amidst a technical unwinding of the previous week’s sharp sell-off and supportive global investor sentiment.
The GBP/EUR rate has recovered by nearly one percent this week, leading to a high of 1.1315 noted yesterday. The pair has seen a very slight retracement today following yesterday’s GDP release and has moved higher to 1.1296 since opening at 1.1287.
The GBP/USD rate has also had a strong week following the previous weeks Non-Farm Payroll report which sent the rate plummeting down by 3.5% from 1.2430 to trade below 1.20 for the first time in 2023. This week however, cable has deemed resilient and is up over 1% from the weekly low to trade at 1.2114 on the day. The predominant driving factor for the pair this week was softer U.S. data and slightly dovish comments from members of the Federal Reserve.
EUR/USD has started the morning in a downward trajectory and continues to trade in its daily range above 1.07. The USD is managing to hold its ground against rivals as US yields stay near the weekly high. February UoM Consumer Sentiment Survey data from the US will be looked upon for fresh impetus before markets close for the weekend.
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