Market report: pound drops as UK growth lags

GBP

Sterling ended the week in decline as data showed UK growth lagging behind other countries.

According to the Office for National Statistics, Q2 Gross Domestic Product (GDP) met expectations of 4.8% growth. However, although considerably stronger than Q1, where growth contracted, the figure was still much lower than pre-pandemic levels of circa 9% growth.

It’s also way behind other Organisation for Economic Cooperation and Development (OECD) countries. To date, eighteen OECD countries have released their Q2 figures and the UK is sat in 15th place. 

To add insult to injury, Industrial production and manufacturing production also fell below expectations.


USD

The dollar relinquished Thursday’s gains against the euro and sterling on Friday following a huge decline in US business confidence. 

August’s University of Michigan consumer sentiment index was expected to read 81.2 but investors were left reeling when preliminary readings came in at just, 70.2, its lowest level since 2011. Americans cited concerns for personal finances, inflation and employment.

The wide miss has caused some investors to rethink any bullish positions on the dollar as the reading may tempt the Federal Reserve to maintain their current monetary policy stance. This follows recent speculation the bank could soon taper monetary policy.

It’s likely the drop in confidence is also down to the increased spread of Covid’s Delta variant. According to recent data, US infections are now at a six month high, averaging 100,000 cases per day.


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