The pound remains in retreat against the US dollar this morning, extending Thursday’s losses as the UK’s latest GDP figures fail to inspire investors, despite a jump in headline growth.
According to data published by the Office for National Statistics (ONS), the UK economy expanded by 0.6 per cent in the third quarter, up from 0.4 per cent in the previous quarter and accelerating at its fastest pace since 2016.
However while the headline figures were strong they appeared to mask some of the underlying risks to the UK economy as growth stalled for the second consecutive month in September and analysts warned of weakness in long-term growth.
Rob Kent-Smith, Head of National Accounts at the ONS said: “The economy saw a strong summer, although longer-term economic growth remained subdued.
There are some signs of weakness in September with slowing retail sales and a fall-back in domestic car purchases.”
Meanwhile the US dollar remains buoyed this morning thanks to the Federal Reserve’s hawkish guidance following its recent policy meeting.
While the Fed made no changes to its monetary policy following the conclusion of its November meeting on Thursday, its forward guidance helped to reaffirm its monetary tightening stance and signalled to investors that it is on track for a December hike.
Looking ahead to next week’s session, the focus is likely to remain on the UK economy as a slew of UK data looks set to be dominate movement in the GBP/USD exchange rate, chief of which being the release of the UK’s latest wage growth figures on Tuesday.
Following on from a surprise jump in average earnings in August GBP investors will be looking to see whether this will be a sustained trend or a one-off, with another robust reading likely to strengthen the pound.
Meanwhile the publication of the latest US CPI figures may bolster the US dollar in the middle of next week, if inflation is shown to have strengthened in line with expectations.