Sterling Falls Following GDP Disappointment
- Written by: Gary Howes
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The British pound fell against the euro, dollar and other currencies after the ONS said the UK economy grew just 0.1% in the three months of the third quarter.
This was below the consensus expectation for 0.2% and down on the Q2 growth rate of 0.3%.
The data confirms a moribund economy and is consistent with the Bank of England providing support with an interest rate cut next month. Bets on lower rates are weighing on the pound.
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In September, the economy contracted 0.1% and year-on-year GDP slowed to 1.3%. This makes for three straight months of zero or negative growth.
Following the release, the pound to euro exchange rate fell to 1.1313 from 1.1330. The pound to dollar exchange rate fell to 1.3108 from 1.3120.
Declines by the pound add to the day's previous falls which followed surprising news of a potential challenge on Prime Minister Keir Starmer's leadership by senior members of his Labour Party.
Separate data from the ONS released Thursday meanwhile revealed a 2% collapse in production.
On Tuesday, it was announced that unemployment rose to 5.0%.
The dysfunction in government and impending tax rises in the November 26 budget underscore the policy headwinds that are constraining the economy and its currency.
Further weakness is possible in the coming two weeks; however, there is a prospect of a recovery following a budget that passes without controversy.
