Aug 11, 2023

The GBPUSD exchange rate is expected to move after the latest UK growth data is released, following the release of US inflation data.


GBPUSD – Weekly Chart

GBPUSD has found support at 1.2680 and attempted to rally to 1.28. A stronger GDP number could see the pair surge past that level.

The UK’s economic growth is expected to stagnate at 0% this month. However, this would still result in a year-on-year growth of 0.5%, which is better than the previous recession forecasts.

The National Institute of Economic and Social Research (NIESR) has predicted that the UK economy will avoid a recession in 2023, but there is a 60% chance of one occurring in late 2024.

The think tank predicted that UK GDP would increase by 0.4% in 2023, which is a slight improvement from its previous forecast in May. However, they also downgraded their earlier prediction of 0.6% growth next year to 0.3% due to higher-than-expected borrowing costs. They predict that it will take another year for the country’s growth to recover to its pre-pandemic levels in early 2020.

The key obstacle to growth prospects will be higher interest rates, which are expected to peak at 5.5%.

Stephen Millard, deputy director for macroeconomic modelling and forecasting at Niesr, said that the triple supply shocks of Brexit, Covid, and the Russian invasion of Ukraine, as well as the monetary tightening that has been necessary to bring inflation down, have had a negative impact on the UK economy.

“As a result, we expect stuttering growth over the next two years and GDP to only recover to its 2019 Q4 level in 2024 Q3”.

“The need to address the UK’s poor growth performance remains the key challenge facing policymakers as we approach the next election.”

Tomorrow, the US consumer sentiment index is expected to fall from 71.6 to 71.0, as consumers continue to feel the effects of rising inflation. Inflation rose by 0.2% on Thursday, but is still 1.2% below the Federal Reserve’s target rate.

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