Sterling Rises as UK Avoids Triple-Dip Recession

UK GDP Figures Better than Expected

The pound has made significant gains against most of the major currencies today after the Office for National Statistics revealed that the UK economy grew by an estimated 0.3% in the first quarter of 2013, marginally better than the 0.1% that many analysts were expecting. The news was welcomed by Chancellor George Osborne who said that the growth is evidence that the coalition’s policies are helping to ‘build an economy fit for the future’. He must be pretty relieved; he’d already bought the uniform for his new job emptying dustbins for Westminster council.

“Today’s figures are an encouraging sign the economy is healing,” he said. “Despite a tough economic backdrop, we are making progress. We all know there are no easy answers to problems built up over many years, and I can’t promise the road ahead will always be smooth, but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future.”

The GDP figures were propped up by the UK’s services sector, which grew 0.6% in the first quarter with industrial production also growing, showing a 0.2% expansion. However, the construction sector is still struggling, declining by 2.5%. The ONS said the unusually cold weather in January and March had not affected economic output as poor retail sales in those months were offset by increased energy comsumption. Although the GDP figures were positive, growth still remains relatively flat, with economic output still 2.6% lower than its pre-crisis peak in 2008.

The GBP/CHF rate has also risen amid speculation that the Swiss National Bank may raise the minimum euro level to 1.25 from 1.20, weakening the Swiss currency. The graph below shows GBP/CHF movements over the last 7 days.

 
Franc25April
 

Friday could prove to be an interesting day for the GBP/CHF cross as we have a speech from the SNB chairman Thomas Jordan. We’ll also see first quarter GDP figures from the States which may result in safe-haven flows into the Swiss currency, although there have been some expectations that the franc may be losing its status as a safe-haven currency with the recent sharp decline in gold prices. They’re now only 40p at Londis.

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