How will GDP figures affect the Pound?

By James Caley

Ten days into January, Sterling is showing strength after a shaky start to the year. It’s currently hovering just 1.2 cents away from its highest point against the Euro in 2023. The big question on everyone’s mind is: how long will it remain at this level?

As we approach the end of the week, all eyes are on the release of November’s GDP figures. The consensus suggests a modest 0.2% growth, which should keep the UK out of a technical recession – at least for now. However, the real suspense lies in December’s results as a negative outcome could send the UK into an unexpected recession which would cast a shadow on the pound’s performance.

While the pound isn’t shining as brightly against the dollar as it is against the Euro, it’s holding its ground at the higher end of the 10-cent range we’ve seen over the past year. Although it hasn’t revisited the peak we saw in July 2023, a cautious stance towards the potential negative GDP figure might prevent it from reaching such heights anytime soon.

Today, there are no major economic releases for the UK, but at 3.15 pm, we have a speech from BOE Governor Andrew Bailey. Despite persistent high interest rates and three votes for a rate increase last month, economists predict a downward adjustment at some point this year. While this might be good news for struggling mortgage owners and first-time buyers, it could pose challenges for the pound.

Looking ahead to 2024, the outlook for the pound in Q1 appears relatively pessimistic, influenced by the looming possibility of a recession and ‘potential’ interest rate reductions.

If you have a currency requirement and you’re waiting for rates to improve, it could be wise to consider your options and take proactive measures.