UK GDP shows expected but largest fall on record.

Despite yesterday’s mixed bag of employment data, the pound managed to breach 1.31 against the USD and drift towards a one month high of 1.1133. British Chancellor Rishi Sunak once again reiterated his stance that despite the government’s best efforts, not all jobs will be protected. The afternoon session did see the early gains revered, especially versus the dollar, reiterating a trending opinion that sterling’s summer gains are linked with the weaknesses of other currencies rather than its own strength.

In another early morning release, the UK announced the preliminary readings for Q2 GDP. As expected it showed the biggest quarterly fall on record as the economy struggled to deal with the global coronavirus pandemic. GDP shrunk by 20.4% vs an expected 20.7%. On a slightly more positive note the economy was able to show continued improvement in June with a gain of 8.7%, reaffirming the economy is at least on the road to recovery.

However it could be argued that similar to yesterday’s employment numbers, current data releases are ‘old news’ and come as little surprise. Aside from ongoing Brexit negotiations, the real test for the pound may not come until later in the year when the furlough scheme is wind down in October which has served to artificially bolster the current 3.9% unemployment number.

Focus today will now shift towards US CPI inflation data which due out later this afternoon.

Economic Calendar