Sterling Declines on Shocking Q4 GDP Figures
The UK economy has unexpectedly shrank dramatically in Q4 of 2010 as construction slumped. The December Snow did little to help things yet negative growth in the UK now signals that the UK could be set for a double dip recession.
GDP fell 0.5% after rising 0.7% in the previous quarter, the office for National statistics announced today. Most economists were predicting a positive 0.5% figure. The pound plummeted on the news losing in excess of 1% against most of the majors. This news is a real blow for the UK economy and shows that the UK was struggling even before David Cameron introduced the 20% VAT rate. This alongside other severe austerity measures could now force the UK economy into negative territory for Q1 in 2011.
Tomorrow sees the release of the BoE minutes from their last policy meeting. The expectation is that the BoE will hold off raising rates in the near term in order to curb inflation. An interest rate rise would almost definitely push the UK economy back into the recession.
The likelihood is that the UK economy will now suffer from a period of stagflation; low economic growth, low interest rates, high inflation and high unemployment. Markets are concerned that poor weather is not the only reason for the news and that this could now progress into a very bad year for the UK economy. Quantitative easing may be required to get things back on track and a number of analysts are now suggesting that George Osborne was foolish to think that aggressively cutting the budget deficit was the right move arguing that UK growth and employment should have come first.
All eyes will be on the minutes tomorrow and we can expect another volatile day.
“Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.â€
Torfx Currency Dealer
Luke Zorab
Most Popular Content
- Gold Prices Holding Firm Above $1500
- Oil Prices Fly Whilst Stocks Say “Whatever”
- Gold Prices, Yield Curves and Rate Cuts
- Gold Price Hitting New 6 Year High But Will It Continue?
- The Pound is in Freefall – When Will It Stop?
- FTSE Weaker in Q2 But Looking For Support
- GBP Gets Ready for an Unpredictable Day with Meaningful Vote 2
- Share Prices Undecided on Direction as Brexit Uncertainty Continues
Currency Articles - May 22, 2019 15:21 - 0 Comments
The Pound is in Freefall – When Will It Stop?
More In Currency Articles
- GBP Gets Ready for an Unpredictable Day with Meaningful Vote 2
- British Pound Stays Strong Whilst The Dollar Remains Weak
Gold and Oil News - Jan 20, 2020 12:34 - 0 Comments
Gold Prices Holding Firm Above $1500
More In Gold and Oil News
Shares and Markets - May 13, 2019 11:15 - 0 Comments
FTSE Weaker in Q2 But Looking For Support
More In Shares and Markets
- Share Prices Undecided on Direction as Brexit Uncertainty Continues
- FTSE / DAX Still Weak Moving Into End of Year