The pound’s gains, however, were held back by last night’s debate between Conservative leadership candidates Boris Johnson and Foreign Secretary Jeremy Hunt. Mr Johnson refused to rule out suspending Parliament for a no-deal Brexit, saying that it would be “absolutely bizarre” to take it off the table. Sterling traders have become increasingly jittery over increasing no-deal fears. Euro traders, meanwhile, remained subdued following comments from the European Central Bank’s Chief Economist Philip Lane, who said yesterday that there are “downside risks” to the Eurozone’s growth. Mr Lane said: “While the euro area is doing well along some dimensions, inflation remains below target… Substantial accommodation is still required to bring inflation back to aim. If more easing is needed, we have the tools.”
Today’s release of the UK GDP figures for May confirmed forecasts, rising from -0.4 percent to 0.3 percent.
Rob Kent-Smith, the Head of GDP at the Office for National Statistics (ONS), said: “GDP grew moderately in the latest three months, with IT, communications and retail showing strength.”
“The economy returned to growth in the month of May, following the fall seen in April. This was mainly due to the partial recovery in car production.”
The UK’s manufacturing production figures for May, however, fell below their forecast 2.1 percent increase to 1.4 percent.
James Smith, a Developed Market Economist at ING, was downbeat in his assessment, saying: [N]ew orders have slumped as firms grapple with what to do with the stockpiles they built … in anticipation of a possible ‘no deal’ Brexit.”
Industrial production, meanwhile, rose from -2.9 percent to 1.4.
The euro, however, failed to benefit from the soaring French industrial output figures for May this morning.
Output increased to the most since November 2016, rising from 0.5 percent to 2.1 percent.
However, as the euro is negatively-correlated to the US dollar, European markets are remaining poised for the speech by the US Federal Reserve Charmain Jerome Powell’s later this afternoon.
If Mr Powell confirms the generally dovish expectations regarding US monetary policy, we could see the GBP/EUR exchange rate sink as the euro benefits from weakened US dollar.