U.K. Economic Activity Expands During the Three Months Through March
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GBP/USD: Economic activity in the U.K. advanced 0.3 percent in the first quarter from the three months through December, the office for National Statistics in London said today. Today’s figures which are the final reading confirms economic expansion from the opening months in the year. At the same time, the annualized rate fell 0.2 percent which was in line with the previous reading and economists’ forecasts. Indeed, GDP figures remain elevated by continued support by the British government, however, the economy faces major headwinds going forward as recent austerity measures by the government may lead the world’s sixth largest economy into a mild downturn. Meanwhile, consumers are likely to scale back spending amid uncertainty in the labor market paired with tight credit conditions. With regards to interest rates, the Bank of England recently refrained from raising its key overnight lending rate and its quantitative easing plan, while the central bank has left the option open for further asset purchases as the economic recovery fails to gain momentum. Market participants will now turn their focus to the meeting of the minutes due out on July 21st. The minutes may continue to show differences among members after Andrew Sentence voted for a twenty five basis point rate hike last month. To discuss this and other topics, please visit the GBP/USD forum.
Written by Michael Wright, Currency Analyst
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