UK economy contraction
[vc_row][vc_column][vc_column_text]Confirmation that the UK economy experienced a significant contraction in the first quarter left the pound on a weaker footing last week.
While a downward revision to the fourth quarter German gross domestic product pushed the Eurozone’s powerhouse economy into a state of recession, this failed to weigh on the euro.
Meanwhile support for the US dollar generally picked up as relations between the US and China soured.
Although the Australian unemployment rate didn’t pick up as far as forecast in April, this was not enough to keep the Australian dollar from sliding in the face of market risk aversion.
Pound slides as UK economy shrinks in first quarter
Even though investors widely anticipated a sharp slowdown in the first quarter UK GDP, this still put a dampener on the pound.
GBP exchange rates were left vulnerable to selling pressure as the quarterly growth rate plunged to -2.0%, weakening confidence in the outlook of the UK economy.
Although the decline was not as dramatic as initially feared, markets still see a significant risk of growth slowing even more sharply in the second quarter.
The mood towards the pound soured further in the wake of the latest round of Brexit negotiations, which ended without any tangible progress towards a deal.
With forecasts pointing towards a major decline in labour productivity in the first three months of 2020, GBP exchange rates look vulnerable to further selling pressure this week.
On the other hand, the UK services PMI looks set to recover some of its lost ground on Thursday after hitting a record low in April.
The pound could return to a stronger footing in the near term as long as the service sector decline shows signs of having bottomed out.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
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* Information courtesy of Currencies Direct, Philip McHugh
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct
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